World Bank Flags AI Adoption Gap and El Niño Risks to Thailand’s Growth

 

Thailand's 2026 growth forecast rises to 2.0% on AI-linked exports, but El Niño, flooding and slow firm AI uptake cloud the outlook.

 

The World Bank has cautioned that damage from a severe El Niño, including flooding of the kind seen across the region a decade ago, could prove larger than current forecasts assume.

 

The warning came as Thailand's economy was singled out for both its gains from the global artificial intelligence (AI) boom and its slow adoption of the technology at home.

 

Speaking at an online press briefing on Tuesday (October 6) to launch the bank's latest East Asia and Pacific Economic Update, Riding the AI Wave, Franziska Lieselotte Ohnsorge, the World Bank's Chief Economist for East Asia and Pacific, was asked what share of Thailand's gross domestic product (GDP) might be lost to flooding in the fourth quarter.

 

She did not offer a figure. Instead, she described the question as a reminder of the risks from a really severe El Niño. The last such event, in 2016, brought widespread flooding across the region, disrupted thousands of lives and caused crop production to fall significantly. Fishery output in the Pacific Islands was also hit, she said.

 

The bank's baseline already assumes that El Niño will weigh on agricultural output, Ms Ohnsorge said, but the damage this year may be underestimated.

 

Past episodes have not always translated into lower GDP growth, she noted, because many factors drive the economy, yet losses in crop production have consistently stood out. Economies that depend heavily on crops are most exposed to downside surprises.

 

 

Thailand upgraded, but from a low base

Despite those risks, the bank has raised its 2026 growth forecast for Thailand by 0.7 percentage points to 2.0%. That is well below the pace in neighbouring Viet Nam (7.4%) and Malaysia (5.1%), but it matches the upgrade given to Malaysia.

 

Ohnsorge said the upgrades across the region share a common cause: a global surge in AI-related activity that is lifting economies embedded in the electronics supply chains behind it.

 

AI-related products account for more than 70% of export growth in Thailand, Malaysia, the Philippines and Viet Nam, she said, and Thailand, Viet Nam and Malaysia stand out for how heavily they rely on exports of AI-enabling goods.

 

That dependence is also a vulnerability.

 

A correction in AI-related investment or financial markets is one of the report's main downside risks, and East Asia would feel it through two channels at once: slower exports and tighter financial conditions. Other regions, she said, would be affected mainly through finance.

 

Thai firms slow to adopt AI The report draws on the World Bank's first survey of firms' use of AI, covering thousands of companies in seven countries, with Thailand's East Asian economy featured.

 

Only 12% of Thai firms had used AI as of December last year, compared with 43% of firms in the United States. Of those Thai firms, only 4% were paying for the technology.

 

Ohnsorge said about 80% of Thai firms currently see no productivity gains from AI, although many are still experimenting. As cheaper models become available, she said, more firms should find productive uses. Major gains will come only when AI is integrated into business processes, which takes time.

 

 

Thailand's experience reflects a wider pattern. The report finds that AI adoption among individuals and firms across the region is rising but still trails advanced economies. Businesses cite high costs, limited expertise, and security and privacy concerns as obstacles.

 

 

Regional picture

For the region as a whole, the bank projects growth of 4.5% in 2026, a resilience it attributes to high-tech exports and investment. According to the World Bank's report, the 2026 forecasts for Viet Nam and Malaysia were revised up by 1.1 and 0.7 percentage points, respectively.

 

China, the region's largest economy, is expected to grow 4.4%, held back by a soft labour market and adjustments in the property sector.

 

Pacific Island countries, which are particularly vulnerable to high energy prices and have limited buffers against external shocks, are forecast to grow 2.2%, which is 0.5 percentage points slower than previously expected.

 

Ohnsorge said higher jet fuel prices had slowed tourist arrivals and that efforts to shield consumers from energy costs were straining already stretched public finances.

 

Resilient remittances have been a mitigating factor. Inflation has risen rapidly across the region this year and is expected to stay elevated into 2027.

 

"East Asia and Pacific's deep integration into global value chains and economic dynamism have positioned the region to benefit from the surge in global AI-related activity," said Carlos Felipe Jaramillo, World Bank Vice President for East Asia and Pacific.

 

 

AI and the jobs market

AI has yet to significantly affect automatable jobs, the report says, but it is already reshaping the demand for skills. Firms increasingly seek AI expertise alongside analytical abilities and social skills.

 

AI is most effective at supporting jobs that require complex thinking and judgement, yet only 13% of jobs in the region fall into this category, compared with 39% in advanced economies.

 

Ohnsorge said the policy priority is to adopt AI and adapt it to local conditions. The strongest foundations, she argued, are basic skills such as mathematics, communication and critical reasoning, along with a sound business climate.

 

These help workers use AI well and also attract investment, including in data centres. For most countries, the report says, the biggest near-term gains will come from "Small AI": adopting and adapting existing, more accessible tools.

 

 

What the report recommends

"The challenge now is to turn the region's strength in producing AI-related goods into widespread AI adoption that boosts productivity and creates more and better jobs for millions of people," Jaramillo said. "If countries act boldly now, AI can become a powerful engine for opportunity, rising incomes, and a more prosperous future for all."

 

Sarvesh Suri, regional vice president for Asia and the Pacific at the International Finance Corporation (IFC), said the private sector can play a central role in turning AI's promise into better jobs.

 

By mobilising private capital for digital and energy infrastructure, expanding business financing and investing in workforce skills, he said, countries can speed up AI adoption while helping small firms become more competitive, dynamic and resilient.

 

To sustain growth and create more productive jobs, the report calls for bold action in three areas:

 

Enable AI adoption through a strong business environment, energy and digital infrastructure, financing, and skills that allow workers to benefit from AI.

Adapt AI locally to create better jobs, using affordable local-language tools in sectors that can employ workers at scale and at all skill levels, such as tourism and agribusiness.

Harness the role of governments as AI users and regulators to improve public services, digital foundations and regulations, and to strengthen regional cooperation.