AI to drive ASEAN+3 growth

The Association of Southeast Asian Nations and three East Asian (ASEAN+3) economies will continue to benefit from booming demand for artificial intelligence (AI) products, keeping them afloat despite the threats posed by the escalating Middle East conflict and a "super" El Nino, a regional think tank said.

Regional GDP for ASEAN+3 members is expected to grow by 4.1 percent in 2026, while headline inflation is projected at 1.6 percent, the ASEAN+3 Macroeconomic Research Office (AMRO) said in its latest ASEAN+3 Regional Economic Outlook on Oct 5. This is unchanged from AMRO's previous forecast presented in July.

ASEAN is projected to grow 4.9 percent in 2026, the same as 2025. The three East Asian economies — China, Japan, and South Korea — are expected to grow this year by 4.5 percent, 0.9 percent, and 3.3 percent.

Export values jumped 23.4 percent in the first half of the year, driven largely by AI‑related goods, responsible for more than two-thirds of the overall increase.

Malaysia, Singapore, and South Korea posted the strongest gains.

He Dong, AMRO's chief economist, said the region has weathered another period of global turbulence with the AI investment boom supporting economic activities across ASEAN+3.

"There is genuine momentum in the regional economy, but it is uneven, and AI is doing a significant share of the work," He said in a webinar.

He said consumption remained resilient, while investment provided additional support. Increased investment in data centers across Malaysia, Thailand, and Indonesia is also seen supporting other sectors including construction and technical services.

But the AI boom also presents "a two-sided risk", He said.

"Looking ahead, growth in the region is particularly sensitive to AI demand, which could boost or dampen exports and investment," He said. Additional downside risks include renewed energy disruptions due to the Middle East crisis and the more persistent El Nino.

Runchana Pongsaparn, AMRO's group head for financial surveillance, said it is still too early to characterize the current AI investment boom as a "broad-based bubble".

She said a significant AI correction could spill over into ASEAN+3's real economy and the financial sector.

"If we have a sharp correction in US AI stocks, it can weaken global risk sentiment and tighten global financial conditions," Runchana said.

ASEAN+3 has "weathered the global shocks well", and this resilience was "underpinned by the well-buffered banking system", she said.

However, Runchana said the region cannot stay complacent, adding that some country-specific vulnerability remains. For example, household debt remains relatively high in Japan, Malaysia, and South Korea.

AMRO also released its ASEAN+3 Financial Stability Report (AFSR) 2026, where the think tank noted that the region's financial systems remain broadly sound despite persistent external shocks.

ASEAN+3's banks remain well‑capitalized, liquid, and profitable. Most economies also hold solid external positions and ample foreign exchange reserves.

However, the region's financial risks are becoming increasingly complex and interconnected. AMRO said sudden US dollar movements could quickly transmit to ASEAN+3 economies through exchange rates, capital flows, asset prices, and funding costs.

The rise of digital finance in the region also entails risks from foreign-currency-denominated stablecoins, cyberattacks, and digital fraud.

AMRO said the region should maintain robust macro-financial buffers through credible policy frameworks, adequate foreign exchange reserves, and deeper local currency markets to address vulnerabilities in its financial sector.

He, AMRO's chief economist, said that regional integration is a "source of resilience."

He said strengthening policy dialogue and cooperation and deepening financial linkages can keep ASEAN+3 economies resilient against external shocks while also preparing them for future risks.