appConfigEntityId

bodyType

customContents

entityId

entityUuid

isVideo

articlePageQuery

article

articleSchemaContent

content

hooksArticlePageAdvertisementConfigArticle

hooksArticlePageFloatingButtonConfigArticle

appConfig

filter

json

liveArticle

Anthony Rowley

The brave new world of artificial intelligence (AI) is going to be a mixed and divisive blessing for governments – not least those of key Asian countries – as well as for financial markets.
The AI revolution points to higher economic growth for economies linked to the tech supply chain, with others being left behind. It also signals the potential for financial crises. Balancing these risks will be tricky. The relative optimism, displayed in a recent report from the International Monetary Fund (IMF), may turn out to be misplaced.
Certain economies in Asia and beyond that are doing well happen to be tied to the AI investment boom and the demand it is creating for infrastructure and hardware.
AI hysteria is manifesting not just in stock price bubbles but in real world investment bubbles too. Where goes the latter, the former goes, too.
This dilemma is illustrated by a World Economic Outlook report from the International Monetary Fund (IMF) published on July 8, which offers some pleasant surprises regarding recent global growth while also raising alerts on other fronts.
Global growth, the IMF projects, is likely to be 3 per cent in 2026 and 3.4 per cent in 2027, down from the average of 3.5 per cent observed in 2024-25, and broadly unchanged compared with the fund’s forecasts in April.
This is not exactly good news but neither does it appear to imply the kind of recession or slump that recent global events – the war in Iran, related energy shocks and inflation scares – have appeared to foreshadow.


The “modest slowdown” in growth so far, says the IMF, “reflects the effects of the war in the Middle East being partly offset by accelerated demand-driven momentum in the global technology cycle thanks to advances in artificial intelligence (AI) and its adoption”.
The impact, it suggests, varies widely based on countries’ exposure to the war and their position in the technology value chain.
According to the report, “Energy exporters outside the conflict zone benefit from favourable terms of trade, whereas economies plugged into the technology-led upturn experience stronger activity even if they are energy importers.”
Meanwhile, “activity weakens for energy importers with limited participation in the technology value chain”. This would include low-income countries in Asia and elsewhere.

So, as global growth in the first quarter of 2026 proved stronger than expected, slowing from 3.8 per cent in the final quarter of 2025 to 3 per cent annualised instead of the 2.7 per cent forecast earlier, who are the winners in Asia?
It seems that much of the positive surprise was concentrated in a few economies which the IMF says are integrated into the global technology value chain, even though some of those economies faced commodity market disruptions induced by the war in Iran.
The world’s top four net exporters of AI-related hardware (Taiwan, South Korea, Thailand and Malaysia) had an average seasonally adjusted annualised increase in growth of 4.4 percentage points, whereas the world’s remaining countries recorded minus 0.3 percentage points.
South Korea, despite its reliance on imported energy from the Middle East, surprised with a 7.5 per cent growth rate, more than four times the 1.8 per cent projected in April by the IMF. This was mostly powered by a semiconductor and AI-hardware export surge.

“China’s economy expanded faster than expected at 8.1 per cent”, according to the IMF report, “with the expansion driven by front-loaded public infrastructure investment”, and a surge in hi-tech manufacturing and in exports, despite “soft” domestic consumption.
Japan’s economy meanwhile grew by 1.8 per cent, also beating expectations, thanks to robust trade and a pickup in domestic demand.
All this appears, at first sight, to imply that the global economy in general and key Asian economies in particular are proving remarkably resilient to multiple economic and physical shocks, and that concerns over possible financial crises are misplaced.
The IMF also says that if the reopening of the Strait of Hormuz goes more smoothly than assumed (which is looking unlikely) and commodity prices turn out to be lower than expected, economic growth could be higher and inflation lower.
“Activity could also surprise on the upside in the short term if AI-related capital spending remains exceptionally strong or financial conditions ease more, continuing to offset the headwinds from geopolitical tensions, trade fragmentation, and weak policy buffers,” says the report.

But if growth is being enjoyed by a relative handful of Asian and other AI supply chain-linked economies, what are others supposed to do? AI investment requires vast amounts of capital running into billions of dollars. Where are countries outside the favoured few supposed to find such sums?
The World Economic Report does not list the supposed losing economies in the great AI gold rush, which is perhaps understandable given the need to avoid deterring external investment in those economies. But it is surely invidious to single out the winners with the implication that they are success stories.
The IMF does acknowledge that “AI hype and exuberant financial markets could … sow the seeds of macrofinancial instability”. And it notes that “renewed conflict would propagate through a further increase in commodity prices and extended volatility, supply shortages, and exchange rate pressures”.
Moreover, AI mania overshadows more sobering issues such as the threat of world war, climate change, fresh pandemics and widening wealth gaps. This is the road to growing economic and social instability.


The classic Chinese parenting playbook won’t survive the AI age

UN Security Council to hold meeting on AI next week amid international concern

Trump condemns ‘sick conspiracy’ against AI, says he is only guardrail needed

Chinese researchers chart 5-stage path toward ‘last AI built by humans’

Artificial intelligence (AI)

Don’t expect the rising tide of AI to lift all boats

Workers walk outside a data centre building under construction in Johor Bahru Malaysia, on September 28, 2024. Photo: AP

A worker walks past the logo of Taiwan Semiconductor Manufacturing Corporation in Hsinchu, Taiwan, on January 29. Photo: AP

A graduate student majoring in semiconductor engineering works at a fab at Korea University in Seoul on June 11. Photo: Reuters

Children wade in the water with cargo ships at anchor in the background and a fisherman nearby, in the Strait of Hormuz off Bandar Abbas, Iran, on June 30. Photo: ISNA via AP

Why the AI future won’t be decided by algorithms and chatbots

Visitors crowd around Huawei’s Ascend AI chip-based CloudMatrix 384 at the 2025 World AI Conference in Shanghai on July 27, 2025. Photo: Xinhua

The Taiwan Semiconductor Manufacturing Company office building in Hsinchu on February 10. Photo: EPA

Thousands of heliostats are arranged in concentric circles at Jinta solar thermal power station in Jiuquan in China’s northwesten Gansu province on June 9. Beijing aims to build computing hubs in provinces with abundant clean energy. Photo: AFP

A healthy economy isn’t built on asset bubbles and debt pyramids

Illustration: Craig Stephens

A person pushes a shopping trolley along an overpass near a homeless encampment in Los Angeles, California, on June 1. Photo: AFP

A worker prepares bags of rice to be sold at 20 Philippine pesos (0.32 US cents) per kilogram at a mini-market, as part of a government food security programme, in Quezon City, the Philippines, on May 15. Photo: EPA-EFE

IMF sees world economy growing just 3% this year amid Iran war

Delegates walk to the entrance of the International Monetary Fund headquarters during the World Bank/IMF Spring Meetings in Washington in April. The IMF now expects the global economy to expand by a sluggish 3 per cent in 2026, down from 3.5 per cent last year. Photo: AP

US President Donald Trump in Macungie, Pennsylvania last month. Trump’s 2025 tax cuts, big gains in productivity and a strong stock market are giving the American economy a lift. Photo: Getty Images via AFP

Opinion

World Opinion

News

World

Asia

China

Economy

Global Economy

Economic Indicators

China Economy

While economies linked to hi-tech supply chains may perform well, unequal outcomes and economic instability still loom for much of the world


While economies linked to hi-tech supply chains may perform well, unequal outcomes and economic instability still loom for much of the world.


International Monetary Fund (IMF)

Commodities

Technology

South Korea

Energy

Semiconductors

Taiwan

Japan

AI: Industry Trends

Middle East

US-Israel war on Iran

Trade

Malaysia

Thailand

Expresses the views, ideas and conclusions of the author. (Eg. Enough of Crazy Rich Asians, think of crazy poor Hongkongers.)


Column

Macroscope

Don’t expect the rising tide of AI to lift all boats

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}While economies linked to hi-tech supply chains may perform well, unequal outcomes and economic instability still loom for much of the world

While economies linked to hi-tech supply chains may perform well, unequal outcomes and economic instability still loom for much of the world