Malaysia’s surprise growth surge spurs 2026 forecast upgrades
The country has emerged as one of South-east Asia’s outperformers in 2025
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[KUALA LUMPUR] Malaysia’s much better-than-expected growth last quarter has prompted a flurry of analyst upgrades to their forecasts for this year, with some predicting the South-east Asian nation will once again outperform official projections.
Maybank Investment Bank, MBSB Investment Bank and RHB Bank expect Malaysia’s gross domestic product growth will exceed the government’s 4 to 4.5 per cent forecast for 2026, while CIMB Bank and OCBC raised their estimates to the upper end of the range. Kenanga Investment Bank sees “upside potential towards 5 per cent if current momentum holds”.
Anchoring the improved outlook is domestic demand. Income growth indicators and policy measures such as cash handouts, along with tourism sector growth point to resilient consumption spending, said analysts Suhaimi Ilias and Azril Rosli of Maybank in a note on Sunday (Feb 15).
Malaysia has emerged as one of South-east Asia’s outperformers in 2025, with the economy’s strong fundamentals and the government’s reform push facilitating a surge in investment in its booming data centre sector.
Alongside Singapore and Vietnam, it has also managed to defy the drag from higher US tariffs and global trade disruptions.
Higher growth helped the government beat its fiscal consolidation target for a second straight year in 2025, with the budget deficit narrowing to 3.7 per cent of GDP compared to its 3.8 per cent aim.
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The Finance Ministry recently vowed to uphold fiscal discipline to safeguard long-term sustainability while supporting the economy’s momentum.
The solid performance, along with contained inflation, has analysts expecting the central bank will continue to keep the interest rate unchanged through 2026.
Bank Negara Malaysia has cut the overnight policy rate (OPR) just once in the past five years, and said on Friday that it sees growth momentum continuing this year amid moderate price pressures.
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“We expect that the sub-2 per cent inflation rates for 2026 will provide room for the central bank to maintain the OPR at its current level, with hotter and sustained demand-pull inflation being the key trigger for a reassessment of this stance,” said CIMB analysts Chew Khai Yen and Michelle Chia in a note.
External volatilities remain a key risk for Malaysia this year. The trade outlook may be constrained by the impact of higher US tariffs, alongside the risk of softer external demand across major global markets, according to MBSB in a note. BLOOMBERG
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