East Asia and the Pacific is projected to grow by 4.5% in 2026, despite global economic uncertainty, as demand for high-tech goods supports regional growth. Malaysia is among the economies expected to perform better than previously forecast, according to the World Bank’s latest Economic Update for the region, released on 6 October.
The World Bank revised Malaysia’s 2026 growth forecast upwards by 0.7 percentage points to 5.1%. Stronger forecasts for Vietnam and Thailand also reflect the region’s growing role in manufacturing and exporting goods linked to the global artificial intelligence (AI) boom.
Vietnam’s growth forecast rose by 1.1 percentage points to 7.4%, while Thailand’s increased by 0.7 percentage points to 2.0%. China, the region’s largest economy, is projected to grow by 4.4%. Weak domestic demand, a soft labour market and continued adjustments in the property sector remain challenges.
Pacific Island countries face a different outlook. Their economies are projected to grow by 2.2%, 0.5 percentage points below the previous forecast. High energy prices and limited capacity to absorb external shocks continue to weigh on their prospects.
AI Exports Are Growing, but Wider Adoption Remains Uneven
The World Bank’s report highlights a gap between producing AI-related goods and using AI across the wider economy. East Asia and the Pacific has benefited from its integration into global supply chains, particularly as worldwide investment in AI drives demand for advanced technology products.
However, many businesses across the region still face barriers to adopting AI. High implementation costs, limited technical expertise, and concerns about security and privacy can slow uptake. Adoption among individuals and firms also remains behind levels in advanced economies.
The report suggests that businesses do not need to develop entirely new AI systems to benefit from the technology. Instead, many of the region’s near-term gains could come from “Small AI” — adopting and adapting existing, accessible AI tools to improve productivity and business operations.
Carlos Felipe Jaramillo, World Bank Vice President for East Asia and Pacific, said the region must turn its strength in producing AI-related goods into broader adoption that boosts productivity and creates more and better jobs.
For Malaysian businesses, this presents an opportunity to explore practical AI applications beyond the technology sector. Wider adoption could help companies improve efficiency, strengthen competitiveness and respond to changing market demands.
AI Skills Could Shape the Region’s Future Workforce
AI is already changing the skills employers seek, even though its impact on jobs that can be automated remains limited. Companies increasingly value AI expertise alongside analytical thinking and social skills.
The report also identifies a gap in the types of work available across the region. Only 13% of jobs in East Asia and the Pacific involve complex thinking and judgment, compared with 39% in advanced economies.
This matters as AI tools become more widely available. Workers and businesses will need the skills to use these tools effectively, assess their outputs and apply them to tasks that require human judgment.
Sarvesh Suri, IFC Regional Vice President for Asia and the Pacific, said private investment can help accelerate AI adoption. He highlighted the importance of financing digital and energy infrastructure, expanding access to business funding and investing in workforce skills.
Small businesses may particularly benefit from affordable tools that help them improve productivity without requiring substantial investment in custom technology.
Three Priorities to Sustain Growth and Create Better Jobs
The World Bank identifies three areas where governments and businesses can act to help the region sustain economic growth and make AI more widely beneficial.
1. Improve access to AI and digital infrastructure
Businesses need a supportive operating environment, reliable energy and digital infrastructure, financing and workers with relevant skills. These foundations can help companies adopt AI and use it to improve productivity.
2. Adapt AI to local industries and needs
Affordable AI tools designed for local languages and conditions could help industries that employ people across different skill levels. The report highlights tourism and agribusiness as sectors where locally adapted AI could support better jobs and wider economic participation.
3. Strengthen public services, regulation and regional cooperation
Governments can use AI to improve public services while developing regulations and digital foundations that support responsible adoption. Cooperation between economies can also help address shared challenges and encourage wider use of the technology.
Turning Regional Growth Into Long-Term Opportunity
The World Bank’s outlook points to continued growth across East Asia and the Pacific, supported in part by demand for high-tech exports. Malaysia’s revised 2026 growth forecast reflects this regional momentum.
However, sustaining that growth will require more than manufacturing the products behind the AI boom. Businesses must also find ways to apply AI across their operations, while governments and the private sector invest in infrastructure, financing and workforce development.
For Malaysia, the challenge is to turn stronger economic momentum into lasting productivity gains, more competitive businesses and better employment opportunities as AI adoption expands.
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