KUALA LUMPUR, April 21 (Xinhua) -- Malaysia's export outlook faces rising downside risks despite a sustained AI-driven upcycle, as Middle East tensions dampen global growth, disrupt supply chains and raise input costs, according to economists.
While the artificial intelligence (AI) upcycle is expected to continue underpinning Malaysia's trade prospects this year, UOB Global Economics and Markets Research said renewed Middle East tensions, particularly the potential prolonged closure of the Strait of Hormuz, have heightened downside risks to global growth and demand.
"Higher input costs and supply chain disruptions across oil and non-oil materials may weigh on near-term exports and production despite easing U.S. tariff concerns," the research house said in a note on Monday.
It remains cautious and maintains its 2026 export growth forecast at 2.5 percent for now, lower than the official estimate of 8.6 percent.
MBSB Research also continues to expect Malaysia's external trade to moderate, with exports projected to grow at 4.5 percent, slower than 6.5 percent in 2025.
"Nonetheless, we see potential upside boost driven by front-loading of electrical and electronics (E&E) shipments ahead of phased tariffs by the U.S. on wider semiconductor products, in addition to the sustained global tech upcycle," the research house said in a note on Monday.
Despite the U.S. Supreme Court's revocation of 'reciprocal tariffs,' it noted that the trajectory of Malaysia's export performance remains vulnerable to external trade volatility.
This instability is also influenced by escalating Middle East tensions and a series of pending global measures, most notably an impending 15 percent broad-based tariff hike, it added.
RHB Investment Bank also stays vigilant on developments in Malaysia's external environment, with its in-house export growth projected at 9.3 percent this year.
"While we are broadly positive about Malaysia's export outlook in 2026, uncertainties surrounding global trade policies and geopolitical tensions warrant close monitoring," the research house said in a note on Monday.
It, however, still expects Malaysia's export performance in 2026 to be supported by steady regional growth, alongside sustained demand for E&E exports.
Malaysia's exports rose 12.7 percent year on year to 426.53 billion ringgit (about 107.86 billion U.S. dollars) in the first quarter, primarily driven by stronger demand for manufactured goods, particularly E&E products, official data showed Monday. ■
