World Bank cuts East Asia and Pacific 2026 growth forecast to 4.2%

The World Bank has released its East Asia & Pacific Economic Update for April 2026, estimating that developing economies in East Asia and the Pacific (EAP) will expand by only 4.2% in 2026, down from 5% in 2025, before recovering slightly to 4.4% in 2027, amid pressure from China’s slowdown, rising global energy prices and uncertainty over global trade policy.

The report said China, the region’s largest economy, would see growth decline from 5% to 4.2% this year, as domestic purchasing power remains weak, the property sector recovers slowly, and foreign demand slows.

Other countries in the region, excluding China, are expected to slow from 4.9% to 4.1%, reflecting the impact of higher imported energy costs and still-fragile private investment.

Thailand is among the vulnerable countries, hit hard by the costly oil

The World Bank said Thailand was one of the countries most affected by surging global energy prices in the region, as its net imports of oil and gas amount to about 7% of GDP, putting simultaneous pressure on production costs, transport and household living costs.

The report estimated that if crude oil prices in global markets increased by 30%, or about US$20 per barrel (THB650), Thailand’s inflation rate would rise by another 0.67 percentage points within six months, among the highest levels of impact in East Asia.

At the same time, the industrial sector would face higher raw material and logistics costs.

In addition, Thailand was placed among countries with relatively limited fiscal policy space, after its government debt burden stood at about 66% of GDP, limiting its ability to introduce additional subsidies to support the economy as much as needed.

AI-related electronics exports grow strongly, providing partial support

Although the overall regional economy is slowing, the World Bank said the flow of investment in artificial intelligence (AI) technology remained an important driver of electronics manufacturing growth in several ASEAN countries, with Thailand’s electronics exports in 2025 rising by as much as 32%, clearly outpacing general goods exports.

This expansion was driven by rising global orders for components related to semiconductors, data centres and AI-supporting equipment, allowing Thailand to continue benefiting from the relocation of technology supply chains into Southeast Asia.

However, the World Bank warned that AI use in Thailand’s business sector remained low, with only 13-17% of multinational subsidiaries in Thailand and China currently using AI, compared with 37% in the United States.

This reflects constraints in digital workforce skills, high-speed internet systems and an innovation ecosystem that still needs accelerated development.

Asia urged to speed up productivity reform to face global volatility

The World Bank also warned that, over the long term, East Asia’s economies were facing growth driven more by capital accumulation than productivity gains, weakening their competitive potential, particularly in digital industries and advanced technology.

Countries in the region, therefore, need to accelerate investment in energy and digital infrastructure, develop workforce skills and adjust industrial policy to support new waves of investment in AI and semiconductors.

If reforms cannot be accelerated in time, Asian economies, including Thailand, could face overlapping pressure from both high energy costs and intensifying trade competition in the period ahead.