Moody’s Analytics sees the artificial intelligence (AI) boom is a growth cushion for Southeast Asian region amid mounting energy, tariff, and weather risks.

The rating agency said in a note on last Friday that Southeast Asia has navigated a turbulent year better than it expected.

“Higher energy prices, evolving U.S. tariffs, and soft domestic demand threatened to widen growth disparities, yet an artificial intelligence–driven boom in exports and investment has kept the region on a firmer footing than headlines suggest,” it noted.

For the ASEAN bloc, its September baseline has growth easing slightly to 4.8 percent this year and 4.6 percent in 2027 from 4.9 percent in 2025.

While the front-loading of orders seen last year has normalized, it said the AI boom is powering on, even amid a challenging external backdrop.

It sees Vietnam is the region’s strongest performer.

Comparing its January and September baselines, the former being set before the Middle East conflict, most economies are faring better than expected.

“The AI boom has mostly driven the upward revision, lifting growth through data center investment and electronics exports,” said Moody’s.

Countries that are not as closely linked to the AI boom, such as the Philippines, however, have not benefited from this tailwind.

According to Moody’s headline inflation across the six largest ASEAN economies surged after the Middle East conflict emerged in late February and as Brent crude briefly surpassed $100 per barrel in April.

The Philippines was hit hardest, with inflation peaking at 7.2% year on year in April.

Inflation has held above its 2 percent to 4 percent target since, reflecting heavy reliance on imported oil and thin fuel subsidies, it added.

“Geopolitical tensions and climate risk cloud the inflation
outlook for the region. Disruptions to the supply of feedstock used in fertilizers will likely hit the next harvest season,” said Moody’s.

Meanwhile, the El Niño weather phenomenon, which forecasters warn will be especially strong this time, will be another complication facing food producers near the end of this year.

Moody’s also highlighted that currencies have diverged sharply.

Since the start of 2026, most ASEAN currencies have weakened against the dollar.

The Indonesian rupiah has depreciated the most against the U.S. dollar — about 7 percent — on fiscal worries over oil subsidies; the Philippine peso and Thai baht rank next amid weak investor sentiment and their net energy-importer status.

The Malaysian ringgit, on the other hand, has benefited from gas exports and a stronger position in the electronics production chain.

The Singapore dollar has also been on a general appreciation trend, with the Monetary Authority of Singapore tightening its policy band settings in response to imported inflation.

“Although some regional currencies have depreciated to levels last seen during the 1997 Asian Financial Crisis, floating exchange rates, adequate reserves, and low foreign-currency debt mean Southeast Asia is structurally more stable today,” said Moody’s.

According to the rating agency, central banks have turned more hawkish in response.

Indonesia’s central bank has raised its policy rate 100 basis points since May, including an off-cycle hike in June driven more by rupiah weakness than inflation.

Other central banks were motivated by the recent pickup in consumer price index (CPI) readings.

The Bangko Sentral ng Pilipinas has lifted rates by a cumulative 75 basis points since April, reversing course after easing by 25 basis points in February.

In Singapore, MAS steepened the slope of the Singapore dollar nominal effective exchange rate (better known as the S$NEER) policy band in April and July.

The Bank of Thailand, which Moody’s expected to loosen monetary policy this year to support the domestic economy, has instead held its policy rate at 1 percent.

And Bank Negara Malaysia is likely to hold at 2.75 percent though to next year.

“The boost from exports has given some central banks in the region room to hike if needed, although they need to balance this against squeezing household spending,” said the rating agency.

Meanwhile, although the US tariffs still loom, Moody’s opined that the AI boom is doing the heavy lifting.

It is noted that U.S. tariff policy is back in focus. February’s U.S. Supreme Court ruling invalidated prior country-specific tariffs imposed under the International Emergency Economic Powers Act of 1977, briefly lowering the effective rate from its peak.

But Section 122 of the Trade Act of 1974 and new investigations into forced labor and transhipment under Section 301 of the same legislation point to tariffs rebuilding toward pre-ruling levels.

These investigations have targeted major Southeast Asian economies, which are now in the crosshairs as beneficiaries of trade rerouted out of China.

“We expect effective U.S. tariff rates to stay elevated through 2028, with risk skewed toward escalation,

“The carve-out for semiconductor chips is shielding major Southeast Asian tech exporters such as Singapore, Malaysia, and Vietnam from higher effective tariff rates, although this could soon land on the chopping block,” said Moody’s.

The rating agency highlighted that ASEAN’s trade surplus with the U.S. has grown steadily since late 2024, with rocketing electronics exports taking over from a surge in front-loading.

The goal of U.S. tariffs was to reduce the trade surplus of trading partners, but ASEAN’s surplus, which was steady from 2021 to 2024, has grown since President Donald Trump
announced “Liberation Day” tariffs in early April 2025.

Moody’s also noted that China’s trade surplus with ASEAN has grown in parallel, carried by intermediate electronic goods destined for final assembly in Vietnam, Malaysia, and Thailand. While some of this equipment ultimately heads to the U.S., much of it supports data center build-outs within the region.

According to Moody’s foreign direct investment is following the same script.

While the bulk of announced greenfield foreign direct investment (FDI) projects in ASEAN are still in Singapore, numbers are rising in Malaysia and Vietnam as investors pour into data centers, it said.

As a leading indicator, FDI captures optimism in investor sentiment toward the region for the next 18 to 24 months.

While Southeast Asia has done better than expected this year, Moody’s said uncertainties have only grown since the start of the year.

The rating agency sees the resilience of domestic growth and the region’s ability to attract foreign investment are key buffers.

“Geopolitical and trade tensions, top risks to growth, stand to amplify the negative outcomes of fiscal or monetary missteps,

“Excessive tightening of global financial conditions could cause a slowdown in the AI capital expenditure cycle, but we see no evidence of the boom fading yet,” it added.

Data center boom to lift S&SEA growth, but local gains hinge on ecosystem development – Moody’s