The World Bank has raised its outlook for global growth in 2024
The latest World Bank outlook is 0.3 percentage point higher than its previous forecast. AFP

The World Bank raised its 2026 growth forecast for East Asia and the Pacific to 4.5% as stronger-than-expected manufacturing and exports tied to artificial intelligence lifted several economies across the region.

The latest World Bank outlook is 0.3 percentage point higher than its previous forecast, with some of the largest upgrades going to economies closely tied to global technology supply chains.

Vietnam's growth forecast was raised by 1.1 percentage points to 7.4%, while Malaysia's was lifted by 0.7 percentage point to 5.1%. Thailand's forecast was also revised up by 0.7 percentage point to 2.0%.

China, the region's largest economy, is expected to grow 4.4% in 2026. The World Bank said domestic demand there remains constrained by a soft labor market and continued adjustment in the property sector.

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Much of the stronger regional performance has come from demand for semiconductors, electronics and other goods used in AI infrastructure.

AI-related products accounted for more than half of total export growth in most economies in the region and more than 70% in Malaysia, the Philippines, Thailand and Vietnam, according to the World Bank.

Trade growth excluding AI-related goods has been weak or negative in several economies.

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

"East Asia and Pacific's deep integration into global value chains and economic dynamism have positioned the region to benefit from the surge in global AI-related activity," Carlos Felipe Jaramillo, World Bank vice president for East Asia and Pacific, said in the World Bank release.

The bank said the benefits remain uneven, with AI-related growth concentrated in manufacturing and exports while broader adoption across businesses and workers is still limited.

Companies in the region continue to face high costs, shortages of expertise and concerns around privacy and security when adopting AI tools.

The World Bank said one near-term opportunity lies in what it calls "Small AI," or adopting and adapting existing AI tools rather than developing large models or expensive computing infrastructure from scratch.

AI is also beginning to affect hiring patterns. Companies are increasingly looking for workers with AI skills as well as analytical and social abilities.

Only about 13% of jobs in East Asia and the Pacific involve the type of complex thinking and judgment where AI is currently most effective as a supporting tool, compared with 39% of jobs in advanced economies, according to the bank.

The region's exposure to AI-related trade also leaves some economies sensitive to changes in global technology investment.

The World Bank said AI-related capital spending has risen rapidly, while a significant portion of planned investment is expected to be financed through private credit.

A slowdown in global AI spending would affect economies that have become major suppliers of semiconductors, electronics and other technology equipment.

The bank expects regional growth to moderate after this year, to 4.4% in 2027 and 4.3% in 2028.

Growth also remains uneven across the region. Pacific Island economies are expected to expand 2.2% in 2026, 0.5 percentage point below the bank's previous forecast, as higher energy costs weigh on countries with limited fiscal buffers.

The World Bank said broader AI adoption will depend on investment in digital and energy infrastructure, access to financing and worker skills.