ING's latest analysis suggests that the economic benefits of AI-driven growth are narrowing in Asia, with developed markets like South Korea and Australia likely to slow more than their developing counterparts. The report highlights that South Korea's growth has been concentrated in tech sectors, while broader economic indicators such as domestic demand and wage growth have lagged. This divergence is less pronounced in Southeast Asia, where countries like Singapore and Malaysia have seen resilient domestic demand alongside strong external-sector performance.
The Philippines' growth slowdown in 2026 was attributed to policy and political uncertainties, which are expected to gradually fade. Meanwhile, India is positioned favorably, having benefited less from the AI boom but also being less exposed to potential corrections. Structural reforms and infrastructure spending are expected to support India's growth as the AI cycle normalizes.
ING's risky call predicts that foreign exchange (FX) pressures will persist across much of South Asia in 2027, even as regional growth remains resilient. Households and businesses are favoring foreign currency assets due to high global yields and a desire to diversify away from domestic currencies. In contrast, North Asian currencies are expected to remain better supported by the AI investment cycle, with stronger exports of AI-enabling goods supporting trade surpluses and capital inflows in countries like Korea and Taiwan.
The bold call from ING is that inflation will ease across Asia ex-Japan/China through 2027, as supply-side shocks fade. Higher inflation in economies like Australia and the Philippines has largely been driven by energy-related costs rather than persistent domestic demand pressures. While AI-related investment is creating pockets of 'chipflation,' its direct contribution to headline inflation is expected to remain modest. Most Asian central banks are likely to gain confidence that inflation is returning sustainably toward target, creating scope for policy easing in the second half of 2027 to support growth. Japan, however, remains an exception, with stronger wage growth and labor shortages keeping the Bank of Japan on a gradual tightening path.