KUALA LUMPUR — Malaysia’s economy is expected to grow by 5.1 per cent this year and 4.7 per cent in 2027, largely driven by external demand from artificial intelligence (AI)-related investment and exports, according to the World Bank.

Lead economist for Malaysia Apurva Sanghi said the revision is 0.7 per cent percentage points higher from its previous April forecast and above regional growth of 4.5 per cent.

“Malaysia has recorded the strongest AI-driven export growth in the region, with more than 70 per cent of the country’s overall export growth in early 2026 attributed to increased demand for AI related products.

“So, 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 on Malaysia,” he said during a media briefing on October 2026 East Asia and Pacific (EAP) Economic Update today.

He cautioned that a potential reversal in the global AI boom is a key downside risk to Malaysia’s economic outlook, adding that fully realising the technology’s potential would require faster adoption and broader diffusion.

“Malaysia still lags in equipping its population with strong foundational skills, as highlighted in previous Malaysia Economic Monitor reports and other studies,” he said.

Apurva said a sharp reversal could affect Malaysia through two channels: financial channels, wherein the repricing of AI assets could trigger capital outflows from emerging markets, and the real economy channels, through a slowdown in global trade, especially given Malaysia’s strong linkages to the US and China.

“A repricing of AI related assets could prompt global risk aversion and tighten financial conditions, potentially leading to capital outflows from emerging markets including Malaysia.