The World Bank has increased its growth forecast for the East Asia and Pacific (EAP) region to 4.5% for 2026, up 0.3 percentage points from its April projection. This improvement is largely driven by the surge in exports related to artificial intelligence (AI) technologies across 23 economies, including China, Vietnam, Indonesia, Malaysia, and Thailand. Vietnam saw the most significant upgrade, with its growth outlook rising by 1.1 percentage points to 7.4%. Despite this growth, the bank noted that trade excluding AI products has been weak or even negative, highlighting the region's growing dependence on AI-related manufacturing and exports.

AI-related goods have become a crucial part of export growth, representing over half of the export increases in most EAP countries, and exceeding 70% in Malaysia, the Philippines, Thailand, and Vietnam. Collectively, China, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam shipped $1.4 trillion in AI-related goods over the past year through April. South Korea recorded a record $120.9 billion in exports in September, with semiconductor shipments, largely led by Samsung and SK Hynix, forming a major component. The World Bank underscored the dominant position of these chipmakers, which represent 43% of South Korea's Kospi index value.

However, the World Bank cautions about risks stemming from the region’s heavy reliance on AI, particularly on the spending side. AI-related capital expenditures in the U.S. have reached about 6% of GDP, nearing the tech investment peak of 2000. This rapid spending growth could be at risk of a sharp downturn, as signs of cooling demand and easing prices for key electronics emerge. HSBC economists have observed a pullback in new orders and inventory data, suggesting a possible slowdown in AI hardware shipments from Asia, which could expose economic vulnerabilities and result in significant negative spillovers across the region’s economies.

Financing of the AI boom also presents concerns, with $800 billion out of $2.9 trillion in planned AI capital expenditure between 2025 and 2028 expected to come from private credit sources, whose markets are less transparent and have already faced challenges this year such as markdowns and defaults. Additionally, tighter financial conditions from recent central bank rate hikes, including the U.S. Federal Reserve’s first increase in over three years, may dampen AI investment growth. The World Bank warns that a slowdown in the U.S., where AI demand is significant, could reduce growth in emerging markets by up to 0.6 percentage points, with East Asia particularly exposed due to its critical role in the AI supply chain.