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

[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 rose 5.3 per cent in the three months to September from the year-ago period, going by advance estimates from the Department of Statistics Malaysia on Friday (Oct 16), beating the 5.1 per cent median prediction in a Bloomberg survey.

Third-quarter growth, however, slowed from the 6 per cent expansion in the previous three-month period.

Growth in Q3 was underpinned by positive performance in most economic sectors, the department said. 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.

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“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. “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 per US dollar after the GDP print, while local stocks held losses.

The services sector rose 5.4 per cent, bolstered by wholesale and retail trade, information and communication as well as finance, the statistics department said.

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Manufacturing strengthened by 7.5 per cent, backed in part by export-oriented industries, particularly electrical and electronic products.

Bank Negara Malaysia governor Abdul Rasheed Ghaffour said on Thursday that the economy is likely to grow about 5 per cent in 2026, with the nation’s diverse sources of growth helping cushion it against any slowdown in the AI boom.

The economy grew 5.5 per cent during the three quarters of 2026, the statistics department said, above the government’s revised growth forecast of 4.8 to 5.3 per cent for the year.

The government in October raised the forecast from 4 to 5 per cent previously.

Household spending remains firm, as fuel subsidies helped shield consumers from elevated energy cost. Malaysian Prime Minister Anwar Ibrahim earlier in October also announced more cash aid and a higher minimum wage for next year to ease cost-of-living pressures.

The government expects the country’s economy to grow at a range of 4.2 to 5.2 per cent in 2027, supported by sustained domestic demand investment activity.

Preliminary GDP data, which will provide a detailed analysis of Q3, will be released on Nov 18. BLOOMBERG