Asia-Pacific economies are expected to remain resilient in 2026, supported by a technology export boom driven by artificial intelligence (AI) demand, although growth prospects will continue to face pressure from energy market disruptions, inflation risks and potential trade tensions, according to S&P Global Ratings.
In its Economic Outlook Asia-Pacific Q3 2026: AI-Exposed Markets To Outperform report, S&P Global said the region’s economic outlook is being shaped by three major forces — resilient global activity, elevated energy prices stemming from geopolitical tensions, and strong AI-related technology exports.
S&P Global noted that growth forecasts across Asia-Pacific have diverged, with economies highly exposed to technology manufacturing receiving upward revisions, while countries more vulnerable to energy shocks facing downward adjustments.
The rating agency maintained its Asia-Pacific growth forecast excluding China at 4.5% for 2026 and expects growth of 4.4% in 2027.
AI exports boost technology-driven economies
S&P Global said the AI investment cycle, particularly in the United States, has provided significant support for Asian exporters through stronger demand for semiconductors, memory chips and technology-related products.
Economies with larger technology manufacturing exposure, including Taiwan, South Korea and Vietnam, are expected to benefit the most, while Malaysia, Singapore, Thailand, Japan and China are also seeing positive spillovers from rising technology exports.
The report highlighted that technology exports have grown strongly, with rising demand pushing up both shipment volumes and prices. In April, South Korea’s overall export prices in US dollar terms increased 31.6% year-on-year, while Taiwan recorded a 17.4% increase.
S&P Global said these gains have helped offset some of the negative effects from higher energy import costs, particularly among technology-focused economies.
China faces weak domestic demand
Meanwhile, China’s domestic economy remains under pressure from a prolonged property downturn, tighter fiscal conditions and weak consumer confidence.
S&P Global expects China’s real GDP growth at 4.4% in 2026, broadly unchanged from earlier projections, as stronger export performance offsets subdued domestic activity.
The report noted that China’s exporters are benefiting from the AI-related technology boom, although domestic consumption and investment momentum remain weak.
Energy risks weigh on inflation and growth
The report warned that elevated energy prices remain a key downside risk for the region, particularly as many Asia-Pacific economies rely heavily on energy supplies from the Middle East.
Higher energy costs are expected to increase production expenses, weaken household purchasing power and contribute to inflation pressures.
S&P Global’s baseline forecast assumes disruptions in the Strait of Hormuz will gradually ease in the second half of 2026, although oil prices are expected to remain elevated in the near term before gradually normalising.
A prolonged disruption scenario could significantly worsen the outlook, with sustained higher oil prices weighing on consumption, investment and overall economic growth.
Malaysia among economies benefiting from tech and data centre investment
For Southeast Asia, S&P Global said the outlook is balanced between strong electronics activity, steady domestic demand and energy-related challenges.
Malaysia, Thailand and Vietnam are expected to benefit from continued data centre investment, which supports construction activity and capital spending.
The agency highlighted Malaysia as one of the economies where technology manufacturing and related investment are helping cushion the impact of higher energy costs.
Monetary policy likely to tighten cautiously
S&P Global expects monetary policy across Asia-Pacific to become slightly tighter as central banks attempt to contain inflation pressures and support currency stability.
Several central banks face a balancing act between preventing higher energy prices from feeding into core inflation and avoiding excessive tightening that could weaken economic growth.
The report added that currency weakness among some regional economies has also increased pressure on policymakers to maintain a more restrictive stance.
S&P Global cautioned that while the AI boom remains a major growth driver, the recovery is vulnerable due to its reliance on a relatively small number of major technology investors and hyperscalers.
“A change in investment plans by these firms could pose risks to economies heavily exposed to the AI-driven cycle,” the report noted.
