BMI Country Risk and Industry Research said it has made further upward growth forecast revisions in East Asia amid artificial intelligence (AI) capital expenditure (capex) boom.

The research house said in a note that South Korea, Taiwan and China register the largest positive growth deviations across the region – upward revisions to 2.2 percent and 8.1 percent respectively, against prior forecasts of 1.4 percent and 6 percent.

“This is reflecting the same underlying dynamic – the ongoing AI-driven semiconductor and data center demand that is proving broadly indifferent to energy price shocks, supported by exceptionally strong first quarter outperformance,” it said.

According to BMI, South Korea’s KRW 26.2 trillion ($17.4 billion) supplementary budget – approximately 0.9 percent of GDP – provides additional support via investment and policy stimulus, but the AI pipeline, not fiscal intervention, is the dominant driver of the scale of the revision.

It also noted that Taiwan’s exceptional 13.7 percent year on year GDP expansion in the first quarter eclipsed its central bank’s own full-year growth forecast of 7.2 percent.

Its revised 8.1 percent reflects the continued acceleration of AI infrastructure investment and the associated semiconductor demand cycle.

“Taiwan’s and South Korea’s first quarter figures were exceptionally strong, and if semiconductor order books and data center investment pipelines hold up against the deteriorating global demand backdrop, East Asia’s outperformance could persist well into the second half – presenting upside risk to our regional growth forecasts,” it added.

As for Hong Kong, China, BMI has maintained their growth forecast at 2.9 percent as strong first quarter provides more than sufficient buffer to absorb the oil price drag while AI-related transshipment activity continues to sustain external demand.

BMI, however, has revised Singapore’s growth forecast down by 0.3 percentage points to 3 percent, a modest downgrade compared with the 2 percentage point decline projected in its April NiGEM analysis under a Level 3 scenario.

The gap reflects both a strong first quarter advance estimate of 4.6 percent year on year gross domestic product (GDP) growth and the fact that the AI capex cycle continues to drive external demand.

“That said, pressure on domestic demand will become more visible in the coming months, as higher imported inflation increasingly weighs on consumption,” it noted.

BMI also said a prolonged AI capex boom could strengthen Malaysia’s trade position, while faster-than-expected implementation of public and private investment projects could lift growth further.

While Malaysia’s outbound shipments of electrical and electronic (E&E) goods are likely to remain supported by global AI-related tailwinds, BMI noted that the downside risk is a continued lackluster performance in non-E&E exports, as demand destruction among key trading partners weighs on overall trade momentum.

As such, it left Malaysia’s 2026 real GDP growth forecast unchanged at 4.3 percent after the country reported growth of 5.4 percent in the first quarter.

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