AI boom helps lift Asia growth outlook despite energy, El Nino risks: ADB

The Asian Development Bank (ADB) has increased its growth forecast for developing Asia-Pacific to 5 percent by 2026, up 0.1 percentage point from its July estimate. The improvement is attributed to resilient domestic demand and a surge in artificial intelligence (AI)-driven technology. However, the region still faces challenges from volatile energy markets and an intensifying El Nino, which could negatively impact agricultural production and inflation.

Despite these headwinds, the bank expects private investment, government stimulus, and AI technology exports to support growth.

Among Southeast Asian economies, Vietnam is the biggest beneficiary, with its 2026 growth forecast rising to 7.8 percent from 7.2 percent, and its 2027 projection increasing to 7.6 percent from 7 percent. Malaysia's 2026 forecast was raised to 4.9 percent from 4.6 percent, and its 2027 projection was lifted to 4.7 percent from 4.5 percent.

Thailand's 2026 forecast was nudged up to 2 percent from 1.8 percent, while its 2027 projection was lowered to 1.9 percent from 2 percent. Indonesia's outlook remains unchanged at 5.2 percent for both years, while the Philippines saw a reduction in its 2026 growth forecast to 3.3 percent from 3.8 percent and a drop in its 2027 projection to 5.1 percent from 5.3 percent.

China's forecasts remain unchanged at 4.6 percent for 2026 and 4.5 percent for 2027. The ADB also lowered its regional inflation forecast for 2026 by 0.1 percentage point to 4.2 percent, citing broad subsidies that offset energy price increases. However, it has raised its projection for 2027 to 3.5 percent. The global AI boom is seen as a key driver of Asia's economic outlook, with the region well-positioned to benefit from the high-end semiconductor production required to meet AI demand.