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

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 through September from a year earlier, according to 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. 

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 artificial intelligence have helped cushion the trade-dependent economy from disruptions caused by the US war against Iran. 

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. 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 in an interview this week that the economy is likely to grow about 5 per cent this year, with the nation’s diverse sources of growth helping cushion it against any slowdown in the AI boom.

Malaysia’s economy grew 5.5 per cent during the three quarters of 2026, the department said, above the government’s revised growth forecast of 4.8 to 5.3 per cent for the year. The government this month raised the forecast from 4 to 5 per cent previously.       

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

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

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