World Bank raises East Asia growth forecast to 4.5% amid AI export boom

The World Bank raised its 2025 growth forecast for East Asia and the Pacific to 4.5% on the strength of artificial intelligence-related exports, while warning that the region’s dependence on the AI boom leaves it exposed to any reversal in global tech spending. The warning arrives alongside separate findings from the Bank for International Settlements comparing the scale of AI investment to the dot-com mania of the late 1990s.

• Vietnam received the largest forecast upgrade in the region, up 1.1 percentage points to 7.4% growth
• Six economies shipped $1.4 trillion of AI-related goods in the 12 months through April, the World Bank said
• Private credit is expected to fund $800 billion of $2.9 trillion in planned AI capital spending through 2028

• 4.5% East Asia-Pacific 2025 growth forecast, up 0.3 point from April
• $1.4T AI-related goods exported by six economies through April
• 83.5% South Korea’s September export growth to a record $120.9 billion
• 6% US AI capex share of GDP, matching the 2000 dot-com peak

The World Bank lifted its growth outlook for the East Asia and Pacific region to 4.5% for 2025, up 0.3 percentage point from its April projection, according to reporting by CNBC on the bank’s regional update released Tuesday. The 23-economy bloc, which includes China, Vietnam, Indonesia, Malaysia and Thailand, is forecast to ease to 4.4% growth in 2027 and 4.3% in 2028. The bank’s own figures show that strength is narrowly based: AI-related products accounted for more than half of export growth in most regional economies and over 70% in Malaysia, the Philippines, Thailand and Vietnam.

Vietnam’s 7.4% forecast leads an AI-export upgrade

Vietnam received the biggest upward revision among the region’s major economies, rising 1.1 percentage points to an expected 7.4% growth rate for 2026. The World Bank said trade growth excluding AI-related goods has been “weak or negative” across the bloc, meaning the region’s broader export performance looks far softer once chips, servers and related hardware are stripped out.

Six economies, China, Indonesia, Malaysia, the Philippines, Thailand and Vietnam, together shipped $1.4 trillion of AI-related goods in the 12 months through April. That figure underpins the bank’s conclusion that the region’s trade recovery is concentrated in a single product category rather than broad-based demand.

South Korea’s record $120.9 billion export month exposes chip concentration

South Korea’s exports rose 83.5% in September to a record $120.9 billion, with semiconductors accounting for half of that total, according to customs data cited by Reuters. The World Bank flagged how concentrated that exposure has become at the equity level as well as the trade level.

Samsung and SK Hynix alone accounted for 43% of the benchmark Kospi index’s value as of end-April, the bank noted. That leaves South Korea’s main stock gauge heavily tied to the fortunes of two chipmakers rather than a diversified industrial base.

Taiwan’s statistics bureau raised its own 2026 growth forecast to 11% from 9.6% on AI demand. It warned in June that “if the high-tech sector faces headwinds, the negative impact on the local economy could be bigger than expected.”

BIS compares the AI financing boom to the dot-com era

AI-related capital expenditure has reached roughly 6% of US GDP, close to the 2000 peak in information-technology investment, the World Bank said, adding that the current cycle “has risen faster than either previous cycle and is still gaining speed.” The Bank for International Settlements’ annual economic report, published in June, separately warned that the boom’s scale and pace resemble the dot-com frenzy of the 1990s and other “manias.”

The financing behind the buildout is also less transparent than in past cycles. Of $2.9 trillion in planned AI capex for 2025-2028, $800 billion is expected to come from private credit, where AI-related lending rose to 34% of activity in 2025 from an 18% average over the prior five years. The World Bank noted private credit portfolios have already seen markdowns, outflows and defaults this year, calling the market “less visible, and have not been tested by a severe downturn.”

Tighter financial conditions could slow the cycle further. The Federal Reserve raised rates last month for the first time in more than three years and signaled one more increase before year end, while the World Bank estimates a 1 percentage point US slowdown cuts other emerging-market growth by 0.6 percentage point, with the hit to investment roughly twice as large. Foreign-currency bank liabilities add a separate channel of exposure, reaching 29.2% of GDP in Malaysia and 20.7% in the Philippines.

The BlockWest read. Regional banks and sovereign allocators are carrying a concentrated AI bet whether they intended to or not. Foreign-currency liabilities worth 29.2% of GDP in Malaysia and 20.7% in the Philippines, alongside Kospi’s 43% exposure to two chipmakers, mean a US capex pullback would transmit through balance sheets faster than a typical trade slowdown. Allocators treating East Asian growth as diversified should recheck that assumption.

The World Bank stopped short of calling the AI buildout a bust, saying instead that investment “had run ahead of realized demand.” Whether that gap closes through an orderly slowdown or a sharper correction will hinge on whether the Fed delivers the additional rate increase it has signaled for later this year, and whether private credit’s AI-linked loan books hold up in a downturn that, by the bank’s own account, has not yet tested them.

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