AI ‘to reshape Malaysia’s economic landscape’

Artificial intelligence (AI) is set to significantly reshape Malaysia’s economic landscape, presenting not only challenges but also ground-breaking opportunities for growth, job creation, and innovation.

That’s the view of Georg Chmiel, co-founder and chair of Juwai-IQI, executive chairman of Chmiel Global Advisory, and board member of World Digital Chamber, who cited recent studies as saying that AI has the potential to boost Southeast Asia’s GDP by $1 trillion with Malaysia leading the way in this transformation.

A 2024 report from the Department of Statistics Malaysia (DOSM) estimates that 600,000 workers may lose their old jobs over the course of the next three to five years as AI replaces clerical, administrative, and some manufacturing jobs.

Globally, 85 million jobs are likely to be lost while 97 million new ones are to be created, demonstrating that strategic workforce management and proactive protective reskilling plans are necessary.

In the case of Malaysia, applying AI does not stop at giving advanced machines to do the work but to improve the people that work, in order to create more high-value jobs, Georg Chmiel said.

He added that by prioritizing AI literacy and comprehensive reskilling initiatives, Malaysia can transform potential disruptions into significant opportunities, ensuring its workforce thrives in the dynamic digital economy.

Chmiel said that the next five years were “absolutely critical to position Malaysia as a leader in the AI revolution”.

Acknowledging the profound impact of AI, the Malaysian government is taking decisive steps to leverage its transformative potential while proactively addressing the challenges posed by job transitions. Minister of Communications and Digital Gobind Singh Deo has described it as a cornerstone of the nation’s economic growth strategy.

Malaysia GDP growth slows despite strong services sector

Malaysia’s GDP growth is estimated to be 4.4% in the first quarter of 2025, a slight decline from the 5% recorded in the previous quarter, according to Chief Statistician Malaysia Dr Mohd Uzir Mahidin.

Growth continues to be underpinned by the services, manufacturing and construction sectors, while the mining and quarrying sector remained on a declining trajectory, he said.

However, on a quarter-on-quarter basis, he said the economy contracted by 3.7%, against a 2.7% expansion in the fourth quarter of 2024.

Continuing its upward trajectory, Malaysia’s industrial production demonstrated moderate growth in February 2025. The Industrial Production Index (IPI) rose by 1.5%, largely driven by a notable 4.8% expansion in the manufacturing sector.

This positive performance outweighed declines in other sectors, notably mining and electricity, which recorded contractions of 8.9% and 2.8% respectively, the figures show.

When comparing month-on-month figures, the IPI experienced a drop of 6.8% in February, a sharp decline compared to a marginal decrease of 0.4% recorded in January 2025.

Looking at a broader perspective, Malaysia’s wholesale and retail trade sector achieved RM148.3 billion (£25.7 billion) of sales in February 2025, reflecting a growth of 5.1% compared with the same month in the previous year.

This increase was largely driven by strong performances in retail trade which grew by 5.9% and wholesale trade at 5.3%. In a similar trend, the volume index also experienced a year-on-year rise of 3.9%, with wholesale trade rising 4.9% and retail trade growing 4.3%. However, when compared to January 2025, the sector saw a slight decline of 0.4% in overall sales, primarily due to decreases in both wholesale trade (-1.9%) and retail trade (-1.5%). This indicates a slowdown in consumer activity month-on-month, despite the positive year-on-year performance.

In a climate of stable economic conditions, Malaysia’s inflation rate eased to 1.5% in February 2025, down from 1.7% in January. This moderation was primarily driven by slower price increases in key categories such as housing, water, electricity, gas and other fuels, which saw a growth of 2.3%, and recreation, sport and culture which increased by 1.5%.

Malaysia’s trade sector continued to demonstrate steady growth in early 2025, driven by strong performances in both exports and imports. In February 2025, Malaysia’s total trade increased by 5.9% year-on-year, reaching RM223.9 billion. This growth was largely fuelled by a 6.2% rise in exports, which amounted to RM118.3 billion, alongside a 5.5% increase in imports, totalling RM105.6 billion. As a result, the trade surplus saw a significant boost, rising by 12.2% to reach RM12.6 billion.

“The country’s labour market continued to show strength, with the number of employed persons rising by 2.9% year-on-year to reach 16.73 million in February 2025. This growth led to an increase in the employment-to-population ratio, which climbed to 68.5%, up from 68.2% in the same period last year,” said Mohd Uzir.

“The labour force also expanded by 2.6%, reaching a total of 17.27 million, supported by a slight increase in the labour force participation rate which rose to 70.7%.