The economy of the Asia-Pacific region (APAC) is entering a phase of controlled but tangible slowdown. My analysis of macroeconomic trends shows that GDP growth rates will decline from 4.3% in 2025 to 4.2% in 2026 and further to 3.6% in 2027. However, without an unprecedented surge in artificial intelligence investments, the decline would have been far more dramatic.
According to the latest calculations by Moody's Analytics, the region is currently operating in a "two-speed" economy mode. On the one hand, colossal demand for AI infrastructure is literally fueling the export sector and industrial production. On the other hand, domestic consumption and investment are struggling under the burden of inflation and tight monetary policy.
The export engine at full throttle
The main beneficiaries of the AI boom have been countries deeply integrated into global semiconductor and memory supply chains. Take South Korea: in the first half of 2026, goods exports reached $496.7 billion, showing growth of 48.4% year-on-year. Particularly impressive is the dynamics of semiconductor shipments, which jumped by 162.6% to $192.4 billion, already exceeding the previous annual record in just six months.
Even more indicative is the growth in trade of information and communication technology products. Here, exports reached a record $253.9 billion with an increase of 120.5%. Semiconductors and solid-state drives (SSDs) played a key role, accounting for 83.7% of this figure. It is obvious that global capital expenditures on AI servers and data centers are directly converting into orders for Asian manufacturers.
Taiwan is also demonstrating phenomenal results: exports for January-June grew by 47.1% to $416.6 billion, and GDP for the first half of the year added 14.15%. The island's authorities have even revised their annual growth forecast upward—to 11.05%.
A notable fact: according to calculations by Nikkei and Mitsubishi UFJ Research and Consulting, South Korea and Taiwan for the first time in history simultaneously surpassed Japan in export volume for a half-year period, while Japan's figure stood at approximately $384.4 billion. Singapore has also not been left behind—its electronic non-oil exports in June grew by 105.1% year-on-year, and integrated circuit shipments by 115.4%.
Hidden imbalances and domestic risks
However, behind these brilliant figures lies a troubling reality. In many economies of the region, domestic demand remains below pre-pandemic trends and global averages. High energy and food prices continue to squeeze real household incomes, accelerating inflation.
For central banks, this creates a classic dilemma: fighting inflation requires raising rates, but this further cools already weak consumption. Therefore, as I expected, the region's regulators in 2026 are acting extremely cautiously, preferring moderate tightening of conditions.
Of particular concern is the fact that dependence on technology exports makes the region extremely vulnerable to a reversal of the investment cycle. We are already seeing signs of a possible pause: rising electronics prices, local equipment shortages, and, most alarmingly, record valuations of technology stocks that are increasingly diverging from fundamental indicators.
South Korea is in the highest-risk zone here, as memory manufacturers have received the lion's share of benefits from the AI boom. If capital expenditures on data centers and accelerators begin to decline, the export impulse will quickly fade, exposing the structural weakness of the economy.
My conclusion: The AI boom is a double-edged sword. Right now, it is masking the fundamental problems of APAC, but in the event of a correction in the technology market, the region could face a double blow: a simultaneous decline in exports and domestic consumption. Investors should be prepared for increased volatility and reconsider the resilience of their portfolios to a possible cooling of the technology cycle.