World Bank lifts Malaysia’s 2026 growth forecast to 5.1pc on AI investment wave

Malaysia's economy is projected to grow by 5.1% in 2026 and 4.7% in 2027, as per the World Bank's latest forecast. This upward revision of 0.7 percentage points is attributed to a surge in AI-driven investment and exports. Apurva Sanghi, the lead economist for Malaysia, highlighted that Malaysia has experienced the most significant AI-export growth in the region, with over 70% of the country's early 2026 export growth linked to increased demand for AI-related products.

However, the economy's dependence on the AI sector has raised concerns, as weak growth in non-AI-related goods could negatively impact overall economic performance. Sanghi cautioned that a potential slowdown in global AI investment could significantly affect Malaysia, emphasizing the need for faster adoption and broader diffusion of AI technology.

The World Bank's forecast for the East Asia and Pacific region is also being adjusted, with growth projected to moderate to 4.5% in 2026-2027, slightly higher than the 4.2% previously estimated. This revision is mainly driven by robust high-tech investment and exports in countries participating in the AI value chain, including China, Malaysia, the Philippines, Thailand, and Vietnam.

However, the region faces challenges such as high energy prices and the potential impact of El Nino, which could lead to agricultural production losses and contribute to higher inflation.