ECONOMIC growth across the Asia-Pacific region is expected to moderate to 4.2% this year from 4.3% in 2025 before slowing further to 3.6% in 2027, as higher prices, tighter monetary policy, geopolitical tensions and trade disruptions weigh on demand.
Moody’s Analytics said the region’s economies were increasingly moving along two distinct growth paths, with the artificial intelligence boom helping to cushion the impact of a broader slowdown.
“Higher prices and tighter policy will weigh on demand, with Asia-Pacific economies growing in two different momentum tracks.
“The artificial intelligence (AI) boom has become a buffer against a more pronounced slowdown in growth, but challenges to growth continue to increase.
“The AI boom is also powering the region’s export engine, with strong demand for semiconductors and other technology products driving shipments from Taiwan, South Korea, China and parts of Southeast Asia, offsetting weakness in other areas,” the firm said in a research note on Wednesday.
The technology-led surge is providing support to economies with strong semiconductor and electronics sectors, even as other parts of the region face weaker domestic demand and rising costs.
Moody’s Analytics, however, warned that geopolitical and trade shocks were adding to inflationary pressures, with the prolonged conflict in West Asia, the closure of the Strait of Hormuz and new United States import tariffs contributing to higher prices.
The firm said central banks across the region were currently tightening monetary policy moderately, but could adopt more aggressive measures if the conflict persisted and oil prices remained elevated.
Higher inflation is strengthening the case for tighter monetary policy, particularly as the AI boom continues to support growth and drive asset prices higher, it said.
The divergent outlook means technology-driven economies and major semiconductor exporters are benefiting from strong global demand, while economies more exposed to energy costs, weaker consumption and trade disruptions face greater headwinds.
Despite the risks, Moody’s Analytics expects the conflict in West Asia to ease, with the resulting inflationary surge likely to be temporary.
The region’s longer-term outlook remains more subdued, however, with growth projected to slow to 3.6% in 2027 as higher prices and tighter financial conditions increasingly weigh on economic activity. - August 26, 2026
