Penang: Despite rising geopolitical uncertainties, a sustained global semiconductor upcycle is expected to drive Penang's economic growth through 2026. OCBC senior ASEAN economist Lavanya Venkateswaran said the state's electrical and electronics (EandE) sector remains resilient, though risks stemming from the West Asia conflict warrant close monitoring as it could weigh on transportation and logistics, potentially impacting the semiconductor supply chain.

According to BERNAMA News Agency, Penang's GDP growth has consistently outperformed the national average since the pandemic. With the global semiconductor upcycle likely to sustain through 2026, the gross domestic product (GDP) growth in Penang is expected to remain supported. On the export front, Malaysia's EandE market, primarily directed toward ASEAN, the United States, and China, is anticipated to continue driving growth, albeit with exports to the US impacted by tariff policies.

While manufacturing remains the state's economic bedrock, Lavanya highlighted that the services sector, including wholesale and retail trade, finance, and insurance, continues to be a significant contributor to the national GDP. The tourism sector could also pose as a burgeoning catalyst, supported by the 'Visit Malaysia 2026' programme.

Lavanya noted a concerted push from the authorities to advance the semiconductor sector up the value chain, while also enhancing intra-city connectivity and promoting tourism for holiday and medical purposes. These efforts are expected to provide some counter-cyclical resilience to the state's economic growth in the coming years.

Addressing the global energy crisis, Lavanya described Malaysia as one of the more resilient economies in ASEAN concerning price and volume shocks. Nevertheless, ripple effects are expected in sectors such as fertiliser, plastics, and logistics. On whether Penang-based exporters are facing a margin squeeze, she indicated it may be premature to fully assess the impact of higher oil prices.

However, Lavanya added that Penang's economy would be susceptible to oil price shocks, given the importance of the manufacturing sector to GDP growth, and that downside risks would intensify if geopolitical risks remain elevated.