PETALING JAYA: Malaysia is well positioned to weather growing geopolitical uncertainty and energy market disruptions, supported by a booming artificial intelligence (AI)-driven technology cycle and strong data centre investments, even as investors across Asia-Pacific become increasingly cautious about global risks.
According to S&P Global Ratings’ latest Asia-Pacific economic outlook, Malaysia is among the region’s beneficiaries of surging demand for AI-related technology exports, helping offset headwinds from higher energy prices and global trade tensions.
“The outlook for the region is balanced between strong electronics-related activity, broadly steady domestic demand, and the energy stress,” S&P said in its report yesterday.
It pointed out that in addition to benefiting from the tech export boom, South-East Asian economies such as Malaysia, Thailand and Vietnam are seeing data centre investment that supports construction and capital spending.
The ratings agency expects Malaysia’s economy to expand 4.9% in 2026, followed by 4.7% in 2027, underpinned by continued strength in electronics manufacturing and digital infrastructure investments.
Malaysia was also identified as one of the Asia-Pacific economies where the positive impact of the technology export boom outweighs the negative effects of higher energy costs stemming from the conflict in the Middle East.
S&P noted that surging AI-related demand is fuelling an Asian tech export boom, providing a major boost to economies with significant technology manufacturing sectors, including Malaysia.
However, the agency cautioned that risks remain elevated. Its baseline forecast assumes disruptions to energy supplies from the Middle East gradually ease in the second half of the year, allowing oil prices to moderate over time. It warned that prolonged disruptions could undermine growth and reignite inflationary pressures across the region.
Assistant manager of research at iFast Capital Kevin Khaw told StarBiz that Malaysia had garnered 32% of South-East Asia’s private AI funding between the second half of 2024 (2H24) and 1H25.
While adding that over two-thirds of the region’s data-centre capacity now under construction across the main five economies is committed to Malaysia, Khaw highlighted that Malaysia’s near-term gross domestic product (GDP) lift is construction and capital expenditure-led rather than recurring.
“A structural against cyclical test is whether the mix shifts toward recurring services such as information and communication technology services, integrated circuit design or higher value manufacturing.
“Some of the key indicators we are watching are foreign investments composition, supply chain components and services-export,” he said.
Meanwhile, a survey by global asset manager Schroders found that 87% of Asia-Pacific investors expect greater market volatility over the next year, driven largely by concerns over Middle East conflicts, US foreign policy uncertainty and energy security.
The survey, conducted among institutional investors and wealth managers overseeing a combined US$72 trillion in assets globally, found that downside protection and diversification have become top priorities for investors.
Only 5% of Asia-Pacific respondents said they intended to maintain their existing strategic asset allocations, while 53% planned to increase geographic diversification outside the United States and 48% intended to shift toward more defensive assets.
Schroders said geopolitical concerns weigh more heavily on investors in the region than elsewhere. Armed conflict in the Middle East was cited as the leading concern by 76% of respondents, followed by uncertainty over US foreign policy and global leadership at 70%.
For Malaysia, the findings suggest that while geopolitical and energy-related risks remain significant, the country’s role in the global AI supply chain and its emergence as a regional data centre hub could help sustain growth and attract investment even amid heightened market uncertainty.
Expanding on that note, however, iFast’s Khaw emphasised that headline growth is more domestically anchored than the export narrative implies, although he nevertheless observed that much of that domestic investment is itself semiconductor and data-centre capital expenditure.
“As such, a global tech downturn would transmit into a lag in domestic demand. We see the risk distribution skewed to the downside and running through tech investment rather than consumption.
“Overall, we are anticipating a slower GDP growth in the third quarter, somewhere between 3% and 4%,” said Khaw.
