Asia’s economies beat growth forecasts on fiscal buffers and AI boom

Asian economies defied expectations to post solid growth in the June quarter, as governments deployed fiscal buffers to shield households from a war-related energy shock while a surge in artificial intelligence demand supercharged the region's technology exporters.

Data released in recent weeks showed India's economy expanded 7.8% year-on-year in the April-June quarter, beating a consensus forecast of around 7%. Malaysia grew 6%, above an advance estimate of 5.8%. Singapore expanded 5.9%, prompting the government to raise its full-year growth forecast to 4.5%-5.5%. Taiwan, meanwhile, is on track for its fastest annual growth in nearly four decades, with the statistics agency upgrading its 2026 forecast above 11%.reuters+6

Fiscal Shields and Energy Scramble

The region entered the Iran war as one of the world's most vulnerable to energy disruption. Governments responded with emergency measures — tapping petroleum reserves, rerouting supplies away from the disrupted Strait of Hormuz, and sourcing oil from Latin America and Central Asia. Singapore nearly doubled support for households and businesses through cash vouchers and rental assistance, while India unveiled aid for smaller businesses and Thailand reshuffled state spending.theedgemarkets

The ASEAN+3 Macroeconomic Research Office reported on Wednesday that fiscal revenues strengthened across most regional economies, supported by resilient activity, even as government spending rose to fund energy-related support and social programs.amro-asia

"Stronger revenue collection is supporting fiscal positions, but elevated energy prices and higher financing costs continue to pose challenges for policymakers," AMRO said.amro-asia

AI Tailwind and Risks Ahead

The AI investment boom provided a timely counterweight. Taiwan's exports are expected to grow nearly 40% this year, driven by semiconductor and AI hardware demand. South Korea and Taiwan have seen their benchmark equity indexes surge over the past six months.nextbigfuture+1

Nomura ↗ 2.12% chief economist Sonal Varma said the resilience had been "a positive surprise" given Asia's energy exposure, and forecast rate increases in Taiwan and Malaysia later this year. India's central bank has also signaled openness to higher borrowing costs.theedgemarkets

But risks remain. A global bond sell-off is driving up government borrowing costs, potentially making it harder to extend subsidies. Growth has lagged in Thailand and the Philippines, where domestic headwinds have outweighed the forces lifting much of the region, while China slowed more than expected. Atradius warned this week that economic performance across emerging Asia is "becoming increasingly uneven".group.atradius+1