AI and Cloud Power Asia’s Economic Growth, But Policy Gaps Remain a Major Hurdle

A groundbreaking brief by the Asian Development Bank (ADB), prepared in collaboration with Telecom Advisory Services and Amazon Web Services Asia Pacific & Japan, reveals how artificial intelligence (AI) and cloud computing are becoming the backbone of economic growth across Asia and the Pacific. Framed as general-purpose technologies, their influence now extends beyond tech sectors into manufacturing, healthcare, finance, and public service delivery. In 2024 alone, AI spending reached $73.4 billion, and cloud computing spending surged to $203 billion. While private enterprise drives most of the demand, public sector investment is increasingly prominent in countries like Australia, the People's Republic of China, South Korea, and Singapore. Importantly, the link between digital investment and economic growth is now quantifiable; a 1% increase in AI spending delivers a 0.03% GDP boost, while a similar rise in cloud investment results in a 0.01% increase. These figures might appear modest at first glance, but across large economies, the aggregate impact is enormous.

Spillovers That Multiply Economic Value

The most compelling insight from the report is that the greatest economic gains are not from spending itself, but from its indirect or “spillover” effects. In 2024, AI-related activities generated an economic impact of $247.1 billion, of which a staggering $218.5 billion, or 88%, came from spillovers such as increased productivity and downstream innovation. For cloud computing, out of a total $245.6 billion in economic benefit, nearly $119.2 billion was derived from such secondary effects. These spillovers amplify the return on technology investments, especially when the technologies are integrated. Cloud-enabled AI platforms alone contributed $102 billion to GDP, while generative AI tools like chatbots and autonomous agents added another $60.9 billion. These results signal that AI and cloud are most powerful when deployed in tandem, with cloud computing enabling the scale, training, and deployment of large-scale AI systems.

A Tale of Two Regions: Digital Leaders and Laggards

Across Asia and the Pacific, national experiences diverge sharply. Countries like Singapore, Australia, Japan, and South Korea are reaping the highest returns, with AI and cloud together accounting for over 4% of Singapore’s GDP. In contrast, economies such as Indonesia, Vietnam, and the Philippines fall below the 1% mark. These gaps are not just about investment; they also reflect digital infrastructure maturity, regulatory frameworks, and the composition of the labor force. For example, AI adoption disproportionately benefits skilled workers. For every 1% increase in AI spending, demand for skilled labor rises 0.21%, while demand for unskilled labor drops 0.15%. That dynamic results in productivity gains, estimated at $396 per worker annually, but it also risks widening income inequality. In middle-income economies with a large unskilled workforce, like India and Indonesia, the net effect of AI adoption could be small job losses of around 0.10%.

The policy response must therefore address not only technological diffusion but also inclusion. The report emphasizes four priority actions: creating measurable frameworks for AI skill development, embedding AI into educational curricula, auditing current training programs, and incentivizing public-private upskilling initiatives. Without these, the digital divide between high- and middle-income countries, and within labor markets, could deepen.

Policies Make the Difference Between Progress and Potential

According to the ADB brief, policy readiness is the deciding factor in whether digital technologies become engines of growth or missed opportunities. AI adoption is fueled by public investment in R&D, AI-friendly legislation, startup ecosystems, and cloud infrastructure such as supercomputing centers and broadband. Cloud adoption, meanwhile, is accelerated by open data policies, smart public procurement, cybersecurity readiness, and flexible data governance frameworks.

Countries that have advanced on these fronts, like Singapore, Australia, and Japan, are not only leading in adoption but also extracting significantly higher economic value per dollar spent. In contrast, countries with low policy maturity, such as Vietnam and the Philippines, face structural barriers to both investment and impact. ADB’s econometric modeling shows that countries with higher policy scores are seeing greater gains, even without proportionally higher spending.

Simulations further demonstrate that policy reforms could unlock vast untapped potential. For example, cloud computing spending in New Zealand could increase from 1.7% to 2.4% of GDP with policy reforms. Similarly, India could triple the economic impact of its AI spending by moving from intermediate to advanced policy maturity. These results highlight the urgency of adopting comprehensive digital strategies that not only promote innovation but also safeguard rights, foster inclusion, and attract investment.

The Future: Inclusive Growth Through Smart Digital Governance

The report’s final recommendation is clear: developing economies must prioritize reskilling their workforce and modernizing data policies to harness the full promise of AI and cloud computing. This means removing restrictive data localization rules that limit access to global technologies, while also training a new generation of AI developers, data scientists, and cybersecurity experts. Done right, these steps will not only mitigate risks of job displacement but also democratize the economic gains from digital transformation.

AI and cloud computing will remain the primary growth drivers for Asia and the Pacific over the next decade. The size of that growth will depend almost entirely on whether governments are willing to implement the right policies today. As the region hurtles into a digital-first economy, the choice before policymakers is stark: innovate with foresight or risk stagnation in a tech-driven world. The stakes have never been higher, and the roadmap has never been clearer.