Malaysia’s growth tops forecasts as AI boom drives export surge

Malaysia's economy continued to thrive, surpassing growth expectations despite a slight deceleration in the third quarter. In the three months leading up to September, Gross Domestic Product (GDP) increased by 5.3%, exceeding the 5.1% median forecast in a Bloomberg survey conducted on October 16. This growth was driven by a booming artificial intelligence (AI) sector and resilient domestic demand.

However, third quarter growth slowed slightly from the 6% expansion witnessed in the previous period. This slowdown was largely due to a contraction in the mining and quarrying sector. Despite this, the economy demonstrated its robustness, with most other sectors experiencing positive growth. The services sector, in particular, saw a significant boost at 5.4%, with gains in wholesale and retail trade, information and communication, and finance.

Similarly, manufacturing grew by 7.5%, driven by export-oriented industries, especially those producing electrical and electronic products.

Bank Negara Malaysia's Governor, Abdul Rasheed Ghaffour, indicated that the economy is expected to grow around 5% in 2026, underscoring the diversification of Malaysia's economic growth sources and its ability to weather any potential slowdown in the AI boom.

The government's revised growth forecast for the year stands at 4.8% to 5.3%, which was raised from the previous 4% to 5% prediction in October. Household spending has remained strong, with fuel subsidies cushioning consumers from the impact of rising energy costs. Prime Minister Anwar Ibrahim announced additional cash assistance and a higher minimum wage for 2027 to alleviate cost-of-living pressures.

The government forecasts the economy to grow between 4.2% to 5.2% in 2027, propelled by persistent domestic demand and investment activity. The detailed analysis of the third quarter's GDP data is expected to be released on November 18.