World Bank lifts Malaysia growth forecast to 5.1%, says AI reliance a risk
Economists say AI-linked exports are lifting growth, but expansion outside the sector remains weak.
The World Bank said more than 70% of Malaysia’s export growth in early 2026 came from stronger demand for AI-related products. (Envato Elements pic)
PETALING JAYA: The World Bank has raised its 2026 growth forecast for Malaysia from 4.4% to 5.1%, but warns that the economy's reliance on artificial intelligence (AI)-related investments will leave it vulnerable if the global AI boom slows.
Apurva Sanghi, the lead economist for Malaysia, said more than 70% of the country's export growth in early 2026 came from increased demand for AI-related products, Bernama reported.
"Malaysia is really riding the AI wave, and while it sounds good, the corollary is that growth excluding AI-related goods has been weak, raising concerns about the economy's dependence on the AI sector.
"A slowdown in global AI investment could significantly impact Malaysia," he was quoted as saying during a media briefing on the bank's East Asia and Pacific Economic Update.
Apurva said a reversal in the global AI boom could affect Malaysia through two channels: financial markets, where a repricing of AI-related assets could trigger capital outflows from emerging markets, and the real economy, through weaker global trade.
"If the US growth slows, that has an impact on Malaysia's growth. In fact, in previous analysis, we showed that a one-percentage-point slowdown in US growth lowers Malaysia's growth by 0.8 percentage point," he said.
Franziska Ohnsorge, the bank's chief economist for Asia, said the region's growth was projected to moderate to 4.5% in 2026-2027, 0.3 percentage point higher than the forecast six months ago.
She credited high-tech investment and exports in countries that are part of the AI value chain, including China, Malaysia, the Philippines, Thailand and Vietnam.
"But elsewhere in the region, high energy prices are weighing on growth prospects. The influence of AI on the region's industry is unmistakable.
"AI is already reshaping labour demand, with firms increasingly seeking workers with AI-related and complementary skills, particularly in areas such as mathematics, communications and collaboration," she said.
Ohnsorge said AI-related products account for more than half of export growth in several East Asian countries and more than 70% of export growth in Malaysia, the Philippines, Thailand and Vietnam.
She said elevated energy prices also continue to weigh on growth prospects and contributed to higher inflation across the region in 2026, with price pressures expected to remain elevated into 2027.
Looking ahead, she said the downside risks to the growth outlook include a potential slowdown in global AI-related activity, persistently high energy prices and greater-than-expected damage.