AI Capex Boom Could Boost Malaysia’s Economic Growth - BMI

BUSINESS

KUALA LUMPUR, May 19 (Bernama) -- A prolonged global artificial intelligence (AI)-driven capital expenditure (capex) boom could strengthen Malaysia’s trade position and support stronger-than-expected economic growth, according to research firm BMI.

BMI said sustained investments in AI-related infrastructure and technology could provide upside to Malaysia’s 2026 growth outlook, particularly through stronger exports and investment activity linked to the electrical and electronics (E&E) sector.

“A prolonged AI capex boom could strengthen Malaysia’s trade position while faster-than-expected implementation of public and private investment projects could nudge growth higher,” it said in a note.

BMI added that despite expecting growth momentum to moderate after the first quarter of 2026 (1Q 2026) due to risks surrounding the ongoing United States-Iran conflict, it has left its 2026 real gross domestic product (GDP) growth forecast unchanged at 4.3 per cent.

Malaysia’s economy expanded by 5.4 per cent year-on-year in the first quarter of 2026, slowing from 6.2 per cent in the fourth quarter of 2025.

On the downside, BMI said heightened uncertainty stemming from the US-Iran conflict could weigh on the factors that underpinned Malaysia’s economic growth in the first quarter of 2026, similar to the impact seen during the Covid-19 pandemic.

The firm also pointed to softer foreign direct investment (FDI) inflows in 1Q 2026, with direct investment falling to RM14.7 billion from RM46.0 billion in Q4 2025.

“While the impact of the ongoing US-Iran conflict will likely become more evident in the upcoming second-quarter reading, we believe a more hawkish US Federal Reserve will dampen investment activity by encouraging investors to adopt a more cautious stance and delay investment decisions,” BMI said.