KUALA LUMPUR: Malaysia's economic growth continues to remain resilient this year, against the backdrop of external volatility and uncertainties related to the United States (US) trade policy, according to S&P Global Ratings (S&P).
Its senior economist for Asia Pacific (APAC), Vishrut Rana highlighted that key factors behind the resilience were support from the external sector, with the strong performance of the global technology industry, driven by strong artificial intelligence (AI) demand and data centre investment.
"As a result, a lot of the APAC economies that are part of the technology supply chain have done particularly well.
"Malaysia is a key part of that electronic supply chain in the region, and as a result, the economy has been doing relatively well," he said during the ‘Sector Update: Key Credit Risks for Malaysian Banks, Sovereign Ratings and Economic Outlook' webinar today.
According to Rana, the Malaysian economy is highly externally oriented, with 35 per cent of value-added arising from external demand, adding that steady external conditions will be key for the outlook this year.
Meanwhile, he believes that Bank Negara Malaysia (BNM) will likely be cautious in easing the monetary policy, given the uptick in inflation for specific sectors, particularly personal care, restaurants and financial services.
"If the inflation continues to peak higher, particularly if there is a change in the food prices component, then we are likely to see a shift towards slightly tighter monetary policy settings, although moves in any direction are likely to be marginal.
"Overall, inflation has been relatively contained on the core side. We do not expect significant pressure, but in these sub-components, we might see some higher inflation in the coming months, which is likely to put some pressure on prices while remaining relatively contained," he added.
In the meantime, Rana commended the Budget 2026 initiatives, noting that it remained supportive and continued to focus on industrial policy, moving up the value chain, and aiming to deliver gains for small and medium enterprises (SMEs) in line with the New Industrial Master Plan 2030.
"It remains to be seen how successful those policies are, but in terms of the policy direction, we have some clarity.
"It is going to be manufacturing-led with an emphasis on some of the new technologies, and Malaysia is looking to leverage its existing position in the tech space for that," he added. - Bernama
