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

• AI-related goods drove more than 70% of export growth in Malaysia, Philippines, Thailand, and Vietnam, with six major economies shipping $1.4 trillion of such goods in the 12 months through April 2026
• AI-related capital expenditure has reached about 6% of U.S. GDP, rising faster than previous tech cycles, with $2.9 trillion in AI capex planned for 2025-2028
• The bank warned that $800 billion in planned AI investment from private credit markets poses risks, as these markets are less transparent and untested by severe downturns, while a 1 percentage point U.S. growth slowdown could cut emerging-market growth by 0.6 percentage points

Summary: World Bank Raises East Asia Growth Forecast Amid AI Boom and Concentration Risks

The World Bank upgraded its 2026 growth forecast for the East Asia and Pacific (EAP) region to 4.5%, up 0.3 percentage points from April projections. The 23-economy region includes China, Vietnam, Indonesia, Malaysia, and Thailand. Growth is expected to moderate to 4.4% in 2027 and 4.3% in 2028, with Vietnam receiving the largest upgrade at 7.4% (up 1.1 percentage points).

AI Dependency: The region's growth is heavily reliant on AI-related manufacturing and exports. AI goods accounted for over 50% of export growth in most economies and exceeded 70% in Malaysia, the Philippines, Thailand, and Vietnam. Six countries shipped $1.4 trillion in AI-related goods in the 12 months through April. Notably, Samsung and SK Hynix alone represent 43% of South Korea's Kospi index value.

Key Risk Factors: The World Bank warns that AI capital expenditure has reached approximately 6% of U.S. GDP, comparable to 2000 IT investment peaks. Of the $2.9 trillion in planned AI capex for 2025-2028, $800 billion is expected from private credit markets, which have grown to 34% of AI-related activity (up from 18% average). These less-transparent markets remain untested by severe downturns.

Market Implications: A reversal in AI spending would eliminate a "key pillar" supporting regional growth. A 1 percentage point U.S. growth slowdown could reduce emerging market growth by 0.6 percentage points, with investment hit twice as hard. Banking sector exposure is significant, with foreign-currency liabilities reaching 29.2% of GDP in Malaysia and 20.7% in the Philippines.