Malaysia’s growth tops forecasts as AI boom drives export surge
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The government expects Malaysia’s economy to grow at 4.2% to 5.2% in 2027, supported by sustained domestic demand investment activity.
PHOTO: BT FILE
- Malaysia’s GDP rose 5.3% in the third quarter, beating the 5.1% forecast, but growth slowed from 6% as mining fell and most sectors still stayed positive.
- AI demand lifted exports, especially electronics, while strong domestic spending and household support kept the trade-dependent economy resilient.
- The government expects about 5% growth in 2026 and 4.2% to 5.2% in 2027, with full third-quarter GDP details due on Nov 18.
AI generated
KUALA LUMPUR – Malaysia’s economic growth slowed but still exceeded expectations as the artificial intelligence boom continued to bolster exports and domestic demand remained resilient.
Gross domestic product (GDP) rose 5.3% in the three months through September from a year earlier, according to advance estimates from the Department of Statistics Malaysia on Oct 16, beating the 5.1% median prediction in a Bloomberg survey.
Third-quarter growth, however, slowed from the 6% expansion in the previous three-month period.
Third-quarter growth was underpinned by positive performance across most economic sectors, the department said in a statement.
Only the mining and quarrying sector contracted, it added.
The better-than-expected reading underscores the resilience of Malaysia’s economy, even as growth moderates from a strong first half.
Robust domestic consumption and demand for electronics used in AI have helped cushion the trade-dependent economy from disruptions caused by the US war against Iran.
“The out-turn is broadly in line with our forecast and suggests the growth momentum remains robust, albeit moderating from strong growth in the first half of 2026,” said Lavanya Venkateswaran, economist at OCBC Bank.
“This very much leaves the door open for Bank Negara Malaysia to normalise its policy rate by 25 basis points. Our baseline for the adjustment is in January but it is a close call for the November meeting.”
The ringgit was steady at 4.08 to the US dollar after the GDP print, while local stocks held losses.
The services sector rose 5.4%, bolstered by wholesale and retail trade, information and communication as well as finance, the statistics department said.
Manufacturing strengthened by 7.5%, backed in part by export-oriented industries, particularly electrical and electronic products.
Bank Negara Malaysia governor Abdul Rasheed Ghaffour said in an interview this week that the economy is likely to grow about 5% in 2026, with the nation’s diverse sources of growth helping to cushion it against any slowdown in the AI boom.
Malaysia’s economy grew 5.5% during the first three quarters of 2026, the department said, above the government’s revised growth forecast of 4.8% to 5.3% for the year.
The government in October raised the forecast from 4% to 5%.
Household spending remains firm as fuel subsidies helped shield consumers from elevated energy costs.
Prime Minister Anwar Ibrahim earlier in October also announced more cash aid and a higher minimum wage for 2027 to ease cost-of-living pressures.
The Malaysian government expects the economy to grow at 4.2% to 5.2% in 2027, supported by sustained domestic demand investment activity.
Preliminary GDP data, which will provide a detailed analysis of the third quarter, will be released on Nov 18. BLOOMBERG