KUALA LUMPUR (Oct 6): The World Bank has flagged the risk of a slowdown from a correction in global artificial intelligence (AI)-related activity, even as it raised Malaysia's 2026 growth outlook to 5.1% from 4.4% previously, driven by surging AI-related spending.
Chief economist for Asia Franziska Ohnsorge said a large portion of export growth came from AI-enabling goods, with similar trends lifting forecasts for Vietnam, Thailand, and other regional supply chain participants.
"The influence of AI on the region's industry is unmistakable. Its dependence on AI has been a source of strength," Ohnsorge said during a briefing on the October 2026 Malaysia Economic Monitor report.
However, she warned that this same dependence could become a weakness if global AI activity corrects, listing it among key downside risks alongside higher energy prices and El Niño-hit agricultural output.
Lead economist for Malaysia Apurva Sanghi noted Malaysia had Asean's strongest AI-driven export growth this year, and a reversal would hit via financial markets and trade.
"A repricing of AI-related assets could prompt global risk aversion, tighter financial conditions, potentially leading to capital outflows from emerging markets, including Malaysia.
"The second is to the real economy, in particular, a slowdown in trade," he said.
He noted the global AI boom was supported by low interest rates and abundant liquidity.
"But now major advanced economy central banks, including the US Fed, are hiking interest rates. This increases the cost of capital and could slow global AI investment," he said.
He reiterated that a 1% decline in US gross domestic product (GDP) growth would result in a 0.8% decline in Malaysia's, while a 1% decline in China's GDP growth would result in a 0.4% decline in Malaysia.