Kuala lumpur: 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.

According to BERNAMA News Agency, BMI stated that sustained investments in AI-related infrastructure and technology could provide an upside to Malaysia's 2026 growth outlook, particularly through stronger exports and investment activity linked to the electrical and electronics (EandE) sector. The firm emphasized that a prolonged AI capex boom could bolster Malaysia's trade position and that faster-than-expected implementation of public and private investment projects might push growth to higher levels.

BMI highlighted the expectation of moderating growth momentum after the first quarter of 2026 due to risks associated with the ongoing United States-Iran conflict. Despite these challenges, BMI has maintained its 2026 real gross domestic product (GDP) growth forecast at 4.3 per cent, unchanged from previous estimates. Malaysia's economy recorded a 5.4 per cent year-on-year expansion in the first quarter of 2026, marking a slowdown from the 6.2 per cent growth in the fourth quarter of 2025.

On the downside, BMI noted that heightened uncertainty from the US-Iran conflict could affect the factors that supported Malaysia's economic growth in the first quarter of 2026, drawing parallels to the impact experienced during the Covid-19 pandemic. The firm also observed a decline in foreign direct investment (FDI) inflows in the first quarter of 2026, with direct investment decreasing to RM14.7 billion from RM46.0 billion in the fourth quarter of 2025.

BMI further mentioned that the impact of the ongoing US-Iran conflict is likely to become more apparent in the forthcoming second-quarter reading. Additionally, the firm predicted that a more hawkish US Federal Reserve could dampen investment activity by encouraging investors to adopt a more cautious approach and delay investment decisions.