Asia-Pacific’s economic growth is expected to remain resilient as an artificial intelligence-driven technology export boom supports the region, although weak domestic demand in China, elevated energy prices, and tighter U.S. monetary policy pose risks, S&P Global Ratings said.
S&P raised its baseline 2026 growth forecast for Asia-Pacific to 4.6%, up 0.2 percentage point from its previous forecast, and expects the region to grow 4.4% in 2027.
“Strong exports are a key growth driver, especially in economies benefiting from the AI-related tech export surge,” S&P said, adding that domestic demand remained generally resilient outside China.
In the three months through July, U.S. dollar-denominated exports grew by an average 30% year on year across the region, with only Indonesia and Japan recording growth below 10%.
S&P expects technology export growth to peak soon but remain robust over the next 12 months. Non-technology exports are also expected to benefit from continued global economic expansion.
The agency said the AI investment boom, particularly in the United States, had helped global growth withstand pressure from elevated energy prices.
S&P’s purchasing managers’ index data showed input costs and supplier delivery times remained elevated amid high oil prices linked to the Middle East conflict, while rising consumer inflation was weighing on purchasing power in the United States and Europe.
Global industrial sentiment nevertheless remained resilient through August, including across Asia-Pacific, supporting S&P’s view that global growth would hold up in 2026 and 2027.
The technology-led export boom has been particularly important for economies such as Taiwan and South Korea.
S&P said the share of AI-related exports from the two economies to destinations outside the United States had increased in 2026.
While some of the increase could reflect supply-chain adjustments, it could also indicate that the AI investment boom is broadening beyond the United States.
The agency warned, however, that Asia-Pacific’s growth outlook remains exposed to a potential slowdown in AI-related spending.
Much of the initial AI investment has been undertaken by a relatively small group of companies, particularly U.S. hyperscalers, leaving the technology supply chain vulnerable to changes in their investment plans.
China illustrates the uneven nature of the region’s growth outlook. S&P expects the Chinese economy to grow 4.3% in both 2026 and 2027, with weak domestic demand offsetting strong exports.
Consumption and investment remained subdued through August, reflecting a prolonged housing downturn, weak confidence and fiscal contraction during the first seven months of the year.
S&P estimated that real retail sales fell 0.4% year on year in August, while fixed-asset investment declined 12.9%.
New residential housing sales during the first eight months of 2026 were 52% below the same period in 2020, while housing starts were 79% lower.
“Domestic demand is unlikely to accelerate over the next quarter at least,” S&P said, citing subdued confidence and modest fiscal and housing-market stimulus.
Exports have continued to surge, partly because of the AI-related technology boom.
Both volumes and prices of technology products have increased, while the processing sector has benefited from stronger demand for components used in products that are subsequently re-exported.
S&P said stronger technology exports had also helped revive China’s processing sector, which had been weak for an extended period.