World Bank lifts Malaysia growth forecast to 5.1%, says AI reliance a risk

The World Bank has revised Malaysia's growth forecast for 2026 upwards from 4.4% to 5.1%, but the bank has sounded a cautionary note about the country's heavy reliance on artificial intelligence (AI)-related investments. According to Apurva Sanghi, the lead economist for Malaysia, more than 70% of the nation's export growth in early 2026 is driven by increased demand for AI-related products.

While the country is benefiting from the AI wave, it is also facing weaknesses in growth excluding AI-related goods. A slowdown in global AI investment could have significant consequences for Malaysia, impacting both financial markets and the real economy. If the US economy slows down, Malaysia's growth could be affected by 0.8 percentage points.

Moreover, rising global energy prices are expected to weigh on growth prospects in the region, contributing to higher inflation in 2026 and 2027. The World Bank projects a moderate growth outlook for the region at 4.5% in 2026-2027, slightly higher than the previous forecast. However, the bank warns of potential downside risks, including a possible slowdown in global AI activity, persistently high energy prices and greater-than-expected damage.