The Asia-Pacific region's economy is entering a phase of cyclical slowdown: Moody's Analytics forecasts indicate growth rates declining from 4.3% in 2025 to 4.2% in 2026, and further to 3.6% in 2027. However, the analysts' key conclusion is that without an unprecedented surge in artificial intelligence investments, the decline would have been far more painful.
The region is currently operating in a "two-speed" economy mode. On one hand, export-oriented industries tied to semiconductors and AI infrastructure are showing explosive growth. On the other, domestic consumption and traditional sectors are struggling under the pressure of inflation and tight monetary policy.
The Semiconductor Locomotive: Korea and Taiwan
The most striking example is South Korea. In the first half of the year, goods exports reached $496.7 billion, showing a 48.4% year-on-year increase. Meanwhile, semiconductor shipments surged by 162.6% to $192.4 billion, already exceeding the previous annual record in just six months. Trade in information and communication technology products also hit a new high: $253.9 billion, with chips and SSD drives accounting for 83.7%.
Taiwan is not lagging behind: exports for January-June grew by 47.1% ($416.6 billion), and GDP added 14.15% for the half-year. Authorities have even raised the 2026 growth forecast to 11.05%. Notably, for the first time in history, Korea and Taiwan have simultaneously overtaken Japan in exports (around $384.4 billion) — this is a structural shift that cannot be ignored.
Singapore has also caught the wave: in June, electronic non-oil exports grew by 105.1% year-on-year, and integrated circuit shipments by 115.4%. Clearly, global capital expenditures on AI servers and data centers have become the main driver for all economies embedded in the technology supply chain.
The Flip Side: Domestic Demand and Risks
However, the external shine masks internal imbalances. Moody's emphasizes that consumer demand in most Asia-Pacific countries remains below pre-pandemic trends. Expensive energy and food are accelerating inflation, undermining real incomes. Central banks find themselves in a trap: raising rates cools already weak consumption, while loose policy risks fueling an inflationary spiral.
Particularly concerning is the concentration of risks. Dependence on the AI cycle makes the region vulnerable to any pause in investment. I already see signs of overheating: rising electronics prices, local equipment shortages, and record valuations of technology stocks. South Korea, where memory manufacturers have reaped the main benefits, will be the first to take a hit if capital expenditures on data centers slow down.
Additional threats include energy shocks, trade restrictions, and a possible correction in stock markets. Moody's rightly assesses the risks as tilted toward deterioration.
My expert assessment: the current AI boom is not just a cycle but a turning point for the Asia-Pacific region. The region has benefited from the technological leap, but is now a hostage to its own success. Diversification and strengthening domestic demand are a matter of survival, not growth. Those who fail to adapt in time risk facing a double blow: an export downturn and stagnant consumption.