Kuala Lampur:Malaysia's economic growth is predicted to encounter significant external challenges in 2027, with geopolitical uncertainties, U.S. trade protectionism, and elevated interest rates in developed countries posing major threats, according to an economist.

According to BERNAMA News Agency, Mohd Afzanizam Abdul Rashid, the chief economist at Bank Muamalat Malaysia Bhd, highlighted that the ongoing conflict in West Asia and the U.S.'s protectionist stance under President Donald Trump's administration are critical external factors requiring attention.

He emphasized that the most substantial risk is external, noting the continued West Asia conflict and the persistence of U.S. protectionist policies. Additionally, he pointed out the notable rise in interest rates, especially in the bond markets of developed economies such as the U.S., Europe, and Japan, as a signal that, despite potential growth, there will be a need for future interest rate reductions.

Afzanizam observed that while the global economic cycle is currently stable, the possibility of an economic downturn remains in the coming three to four years.

Domestically, with a general election anticipated next year, Afzanizam commented on investor sentiment, suggesting that foreign institutional investors are likely to scrutinize policy developments, the political environment, and the dynamics within Malaysia's political coalitions. Upcoming events, such as the state election in Malacca, are expected to influence investor decisions.