PETALING JAYA: The International Monetary Fund (IMF) said Malaysia’s economy has shown resilience against global trade tensions and policy uncertainty but advised rebuilding its macroeconomic buffers despite the October Malaysia-US trade deal having helped to reduce uncertainty for businesses and consumers in the country.
It added Malaysia’s sound economic policies and diversified base will ensure growth is sustained, supported by strong domestic demand.
“IMF staff projects growth to slow marginally from 4.6% in 2025 to 4.3% in 2026, mainly reflecting the impact of higher US tariffs on Malaysia.
“Risks to growth are tilted to the downside and stem mainly from external factors,” the IMF’s Malaysia mission chief Masahiro Nozaki said following consultation with the authorities and other stakeholders from Dec 8 to 19, 2025.
The fund warned that as a highly open economy, Malaysia could be affected by a slowdown in external demand in case of an escalation of protectionist trade measures, global financial market volatility, and a potential bust of the artificial intelligence boom.
Breakthroughs in global trade negotiations, stronger-than-envisaged tourism activities, and faster implementation of structural reforms could provide an upside boost to growth.
The IMF welcomed Malaysia’s commitment to prudent fiscal management and plans to steadily reduce the fiscal deficit further to 3.5% of gross domestic product (GDP) in 2026 and to 3% of GDP by 2028.
“Continuing to rebuild fiscal buffers through further high-quality and sustainable revenue and expenditure measures remains critical, as federal government debt, standing at 64.6% of GDP at end-2024, is still above pre-pandemic levels.”
