South Korea is increasingly trying to disguise exports, mainly from China, as Korean products to avoid U.S. President Donald Trump’s steep tariffs, South Korean customs said Monday.
Jung In Sung | Moment | Getty Images
The World Bank has raised its growth forecast for East Asia and the Pacific on the back of artificial intelligence-related exports, but warned that its dependence on the AI boom leaves it vulnerable to a potential reversal in global technology spending.
The region includes 23 economies, including China, Vietnam, Indonesia, Malaysia, and Thailand.
The EAP economy is expected to expand by 4.5% this year, 0.3 percentage points more than the bank expected in April, according to the latest report released on Tuesday. Growth is expected to slow to 4.4% in 2027 and 4.3% in 2028. Vietnam saw the largest upward revision to its forecast among the region’s major economies, increasing by 1.1 percentage points to 7.4%.
However, the region’s strength relies heavily on AI-related manufacturing and exports. Trade growth, excluding AI-related goods, is “weak or negative,” the central bank said. These products accounted for more than half of export growth in most economies in the region, and more than 70% in Malaysia, the Philippines, Thailand and Vietnam.
China, Indonesia, Malaysia, the Philippines, Thailand and Vietnam shipped $1.4 trillion in AI-related goods in the 12 months ending in April, the report said.
According to official data, South Korea’s exports rose 83.5% to $120.9 billion in September, a record high, with chips accounting for half of the total. Reflecting the dominance of semiconductors in the country’s market, the World Bank highlighted that as of the end of April, only two semiconductor manufacturers, Samsung and SK Hynix, accounted for 43% of the value of the benchmark Kospi index.
The risk of AI is on the spending side. AI-related capital spending has reached about 6% of U.S. GDP, similar to the peak of information technology spending in 2000, and the current cycle is “growing faster than any cycle in history and continues to pick up speed,” the bank said.
The Bank for International Settlements warned in its annual economic report in June that the scale and pace of the boom was similar to the dot-com frenzy and other “manias” of the 1990s.
Funding to drive the boom is also unclear. Of the $2.9 trillion in AI capital spending planned from 2025 to 2028, $800 billion is expected to come from private credit, the bank said, with AI-related financing rising to 34% of activity in 2025 from an average of 18% over the past five years. This year, private credit portfolios have experienced declines, outflows and defaults.
Private credit markets are “less visible and have not been tested by a deep economic downturn,” the bank said.
However, the recent tightening of financial conditions, with major central banks raising interest rates for the first time since 2023, could slow the AI boom supported by abundant liquidity, the report said. The U.S. Federal Reserve raised interest rates last month, the first in three years, and signaled one more rate hike before the end of the year.
While the correction may not necessarily mean the AI supercycle is doomed, the investment has “run ahead of real demand,” the group said.
A 1 percentage point slowdown in U.S. growth would reduce growth in other emerging economies by an estimated 0.6 percentage points, roughly doubling the impact on investment, the bank said. “An AI-focused slowdown will have a significant impact on East Asia, as it excels in the AI supply chain.”
Bank funding is the broadest exposure. Bank foreign currency debt appears to be significant in some countries, reaching 29.2% of GDP in Malaysia and 20.7% in the Philippines.
Taiwan’s Bureau of Statistics recently raised its 2026 growth forecast for AI demand from 9.6% to 11%, but warned in June that “the negative impact on the local economy could be greater than expected if the high-tech sector faces headwinds.”
