World Bank Raises East Asia Growth Outlook as AI Boom Fuels Exports, but Risks Mount

The World Bank has upgraded its growth outlook for the East Asia and Pacific region, citing strong demand for artificial intelligence-related products and exports. The region, which includes major economies such as China, Vietnam, Indonesia, Malaysia and Thailand, is now expected to grow 4.5% in 2026, 0.3 percentage point higher than the bank’s previous forecast.

Growth is expected to moderate to 4.4% in 2027 and 4.3% in 2028. Vietnam received the largest upgrade among the region’s major economies, with its 2026 growth forecast raised by 1.1 percentage points to 7.4%, highlighting the country’s growing role in global manufacturing and technology supply chains.

However, the World Bank warned that the region’s economic strength is becoming increasingly concentrated around the AI boom. Trade growth excluding AI-related products has remained weak or negative, while AI-related goods accounted for more than half of export growth across most regional economies.

The dependence is particularly significant in Malaysia, the Philippines, Thailand and Vietnam, where AI-related products contributed more than 70% of export growth. China, Indonesia, Malaysia, the Philippines, Thailand and Vietnam together exported around $1.4 trillion of AI-related goods in the 12 months through April.

Semiconductors remain at the center of this trend. South Korea’s exports, for example, jumped 83.5% year-over-year to a record $120.9 billion, with chips accounting for roughly half of total shipments. The country’s stock market is also highly exposed to the sector, with Samsung Electronics and SK Hynix together representing around 43% of the KOSPI’s value as of the end of April.

The World Bank’s biggest concern is not necessarily the strength of AI demand today, but whether investment in AI infrastructure has moved ahead of actual demand. AI-related capital expenditure has reached around 6% of U.S. GDP, a level comparable with the peak of the technology investment cycle in 2000.

The scale of the current investment boom is also raising concerns about financial stability. Around $2.9 trillion in AI capital expenditure is expected to be deployed globally between 2025 and 2028, with approximately $800 billion potentially financed through private credit. AI-related lending already accounted for around 34% of private-credit activity in 2025, compared with an average of 18% over the previous five years.

Private credit could become a particular source of risk because the market is less transparent and has limited experience dealing with a severe economic downturn. Recent markdowns, outflows and defaults have already highlighted some vulnerabilities in the sector.

A slowdown in U.S. technology investment could therefore have significant spillover effects across emerging markets. The World Bank estimates that a 1 percentage point slowdown in U.S. economic growth could reduce growth in other emerging markets by approximately 0.6 percentage point, with the impact on investment potentially twice as large.

For East Asia, the risk is especially pronounced because the region sits at the heart of the global AI supply chain. A correction in AI investment would not necessarily end the broader AI growth cycle, but it could expose economies that have become overly dependent on semiconductor production, electronics exports and AI infrastructure spending.

Taiwan provides another example of both the opportunity and the risk. Its statistics bureau recently raised the country’s 2026 growth forecast to 11% from 9.6%, largely because of strong AI demand. At the same time, officials warned that a downturn in the high-tech sector could have a larger-than-expected impact on the broader economy.

The World Bank’s message is therefore mixed: AI is providing a powerful growth engine for East Asia, but the same concentration that is boosting exports today could amplify the downside if global AI spending cools. For investors, the key question may increasingly shift from how large the AI opportunity is to how sustainable the current pace of investment and demand can be.