World Bank warns of AI concentration risks as it lifts East Asia and Pacific growth outlook to 4.5%

The World Bank has raised its growth forecast for the East Asia and Pacific region on the back of artificial intelligence-related exports, while warning that its reliance on the AI boom leaves it vulnerable to a potential global tech spending reversal.

The region includes 23 economies, including China, Vietnam, Indonesia, Malaysia and Thailand.

The EAP economy is expected to expand 4.5% this year, 0.3 percentage point more than the bank projected in April, according to its latest report released Tuesday. Growth is forecast to ease to 4.4% in 2027 and 4.3% in 2028. Vietnam received the biggest forecast upgrade among major economies of the region, up 1.1 percentage point to 7.4%.

The region's strength, however, is highly dependent on AI-related manufacturing and exports. Trade growth, excluding AI-related goods, has been "weak or negative," the bank said. Those products accounted for more than half of the export growth in most of the region's economies and more than 70% in Malaysia, the Philippines, Thailand and Vietnam.

China, Indonesia, Malaysia, the Philippines, Thailand and Vietnam shipped $1.4 trillion of AI-related goods in the 12 months through April, according to the report.

Official data showed that South Korea's exports grew 83.5% in September to a record $120.9 billion , with chips making up half of those shipments. Reflecting the dominance of semiconductors in the country's market, the World Bank highlighted that just two chipmakers — Samsung and SK Hynix — accounted for 43% of the benchmark Kospi index's value as of end-April.

The AI risk is on the spending side. AI-related capital expenditure has reached about 6% of U.S. GDP, similar to the 2000 peak in information-technology investment, and the current cycle "has risen faster than either previous cycle and is still gaining speed," the bank said.

There are already signs the boom is cooling, according to a note from HSBC Global Investment Research on Tuesday. "Not only are prices for some key electronics easing, but new order and inventory data point to a pullback in demand," said Frederic Neumann, chief Asia economist at HSBC.