The World Bank has raised its 2026 growth forecast for East Asia and the Pacific to 4.5%, citing strong demand for artificial intelligence-related goods, while warning that the region’s growing dependence on the AI boom could expose economies to a sharp slowdown if global technology spending reverses.
The revised forecast, published on October 6, is 0.3 percentage point higher than the bank’s April projection. Growth is expected to moderate to 4.4% in 2027 and 4.3% in 2028.
Among major economies, Vietnam received the largest upgrade, with its 2026 growth forecast raised by 1.1 percentage point to 7.4%.
However, the World Bank said the region’s growth is increasingly concentrated in AI-related manufacturing and exports. Trade excluding AI-related goods has remained “weak or negative”, while AI-related products accounted for more than half of export growth in most economies in the region.
The contribution was even higher in several Southeast Asian economies, exceeding 70% in Malaysia, the Philippines, Thailand and Vietnam.
China, Indonesia, Malaysia, the Philippines, Thailand and Vietnam exported around $1.4 trillion worth of AI-related goods in the 12 months through April, highlighting the region’s growing role in the global AI supply chain.
AI spending creates new growth risks
The World Bank warned that the same AI investment cycle supporting regional growth could become a source of vulnerability if spending slows sharply.
AI-related capital expenditure has reached around 6% of US GDP, comparable with the peak of information technology investment during the dot-com era in 2000. The current investment cycle has also accelerated faster than previous cycles and continues to gain momentum, the bank said.
The scale of planned investment is raising concerns about how the boom is being financed. Of the estimated $2.9 trillion in AI capital expenditure planned between 2025 and 2028, around $800 billion is expected to come from private credit.
AI-related lending accounted for 34% of private-credit activity in 2025, up from an average of 18% over the previous five years. The World Bank noted that private-credit markets are less transparent and have not been tested by a severe downturn.
A reversal in AI investment could therefore remove what the bank described as “a key pillar” of growth for the region.
The risk is particularly significant for East Asia because of its position in the global AI supply chain. The World Bank estimated that a one-percentage-point slowdown in US growth could reduce growth in other emerging markets by 0.6 percentage point, with the impact on investment roughly twice as large.
“A slowdown concentrated in AI would be material for East Asia because of the region’s prominence in the AI supply chain,” the bank said.
Southeast Asia faces concentrated exposure
The concentration of AI-related trade and investment also leaves several Southeast Asian economies exposed to shifts in technology demand.
Foreign-currency-denominated bank liabilities are significant in some economies, accounting for 29.2% of GDP in Malaysia and 20.7% in the Philippines, according to the report.
Taiwan, another major technology hub, recently raised its 2026 growth forecast to 11% from 9.6%, driven by AI demand.
However, its statistics bureau has also warned that a downturn in the high-tech sector could have a larger-than-expected impact on the wider economy.
The World Bank said a correction in AI investment would not necessarily signal the end of the broader AI investment cycle. However, it cautioned that spending may have moved ahead of realised demand, creating risks if financial conditions tighten further.
For East Asia and the Pacific, the outlook therefore presents a growing paradox: AI is strengthening exports, investment and near-term growth, but the region’s increasing dependence on the technology also means a reversal in global AI spending could have an outsized economic impact.