The International Monetary Fund (IMF) has increased its forecast for Malaysia’s real GDP growth to 4.7% in 2026, marking a 0.4 percentage point upward revision.

In its April 2026 World Economic Outlook (WEO) released on Tuesday, the IMF also projected Malaysia’s GDP to grow by 4.3% in 2027. Previously, Malaysia achieved a solid growth rate of 5.2% in 2025, driven by strong domestic demand.

Within its January 2026 WEO, the IMF had earlier forecast Malaysia’s GDP growth for 2026 at 4.3%.

Bank Negara Malaysia expects the economy to expand between 4% and 5% this year, supported by strong domestic fundamentals and a diversified export base that helps cushion the impact of external challenges, particularly those stemming from the conflict in West Asia.

Meanwhile, the IMF projects global economic growth to reach 3.1% in 2026 and 3.2% in 2027. This represents a slowdown from the approximately 3.4% growth recorded in 2024-2025, with the pace expected to stabilise around that level over the medium term, below the historical average of 3.7% observed between 2000 and 2019.

The 2026 forecast has been lowered by 0.2 percentage points, while the projection for 2027 remains unchanged, The Edge Malaysia reports.

Furthermore, the IMF noted that the relatively small downgrade to global growth in its baseline forecast, compared with the January 2026 WEO Update, reflects the presence of ongoing supportive factors that partly offset the adverse effects of the US-Iran conflict.

These positive influences include reduced tariffs, existing policy support, and momentum carried over from stronger-than-expected economic performance in late 2025 and the first quarter of 2026 in certain economies.

“This masks significant variation across countries, with lower-income commodity-importing economies being hit particularly hard through higher energy and food prices as well as foreign exchange depreciation,” it said.

Moreover, the conflict in West Asia affects economic growth unevenly across countries, depending on their level of exposure through factors such as geographic proximity, financial linkages, remittance flows, and reliance on energy resources.

“Overall, it has a larger net impact on growth in emerging market and developing economies compared with advanced economies, lowering growth in 2026 for the former group by 0.3 percentage point relative to the pre-conflict forecast,” the IMF said.

Growth in emerging and developing Asia is projected to ease to 4.9% in 2026 and 4.8% in 2027, down from 5.5% in 2025.

At the same time, global inflation is expected to temporarily halt its downward trend, with headline inflation rising from 4.1% in 2025 to 4.4% in 2026, before declining again to 3.7% in 2027. This represents a 0.7 percentage point upward revision for 2026 compared with the October 2025 WEO, mainly due to anticipated increases in energy and food prices.

In addition, global trade volume growth is projected to slow from 5.1% in 2025 to 2.8% in 2026, before recovering to 3.8% in 2027. This pattern reflects early front-loading of trade activity and the effects of tariffs, although these are expected to be gradually offset by shifts in trade relationships and adjustments in production chains over time.

On a more positive note, the IMF highlighted that its baseline forecast does not yet factor in the direct impact of artificial intelligence on productivity, as adoption remains relatively limited across many sectors.

However, the recent surge in investment related to AI, along with its faster adoption, could significantly enhance productivity and boost medium-term economic growth earlier than expected.

“This could lift global growth by as much as 0.3 percentage point in the near term and by 0.1-0.8 percentage point in the medium term.

“The benefits could be shared across the economy, provided there are complementary policies to contain the potential impact on energy prices by relaxing power supply constraints, initiatives to scale up the necessary critical intermediate inputs, and labour market programmes to manage workforce transitions,” the report goes on to add.