PETALING JAYA: Despite lingering downside risks from global geopolitical tensions, HSBC Global Investment Research maintains a bullish view on Malaysia’s economy, expecting economic growth to hit 4.5% in 2026.
This would place growth at the upper end of the Malaysian government’s forecast range of between 4% and 4.5%.
It said that for two consecutive years, the country posted around 5% gross domestic product (GDP) growth, above its estimated potential, while the ringgit strengthened past the psychological RM4.00-per-US-dollar level, extending its run as Asia’s best-performing currency into 2026 year-to-date (y-t-d).
“On Jan 28, the ringgit strengthened to an eight-year-high of 3.92 against US dollar, which was a 3.6% appreciation y-t-d.
“These positive developments are timely reminders of Malaysia’s economic strengths: strong growth, resilient trade, investment appeal, fiscal commitments and steady monetary policy,” HSBC’s Asean economist Yun Liu said in a report
She said trade has been supportive, defying the 19% headline tariff imposed by the United States.
Like some of its regional peers, Malaysia’s trade surged to a record high in 2025.
“After the initial frontloading faded, the country’s heavy concentration in electrical machinery and electronics proved crucial, buoyed by elevated AI (artificial intelligence)-driven chip demand.
“Fortunately, Malaysia is exporting the ‘right’ products that are currently in heavy demand,” Liu said.
She noted that Malaysia has gained substantial market share in certain chips, such as processor and amplifier chips and parts of integrated circuits, reflecting its significance in the global tech supply chain.
There may be more room for semiconductor trade growth, as production in Malaysia typically lags behind that of Korea and Taiwan.
That said, risks remain. Potential US tariffs on semiconductors hang over Malaysia’s trade like a Sword of Damocles, a challenge shared by all tech-exposed economies.
Liu noted that tourism has become a major growth driver for Malaysia, which overtook Thailand as Asean’s top destination in 2025.
The visa-waiver programme for mainland Chinese tourists boosted spending, helping tourism receipts likely exceed 10% of GDP last year.
The momentum is set to continue under the Visit Malaysia 2026 (VM2026) campaign, which aims to attract 47 million tourists and lift tourism receipts to around 16% of GDP.
On the fiscal front, she noted that Malaysia has steadily reduced its deficit from an average of 6% of GDP during the Covid-19 pandemic to 3.8% in 2025, with plans to narrow it further to 3.5% in 2026, while pursuing reforms to its subsidy programme.
Additionally, she pointed out that the steady monetary policy outlook has provided an anchor.
The central bank has signalled little urgency to move the policy rate in either direction, and HSBC expects Bank Negara Malaysia to hold the overnight policy rate at 2.75% through 2026, even as some regional peers pursue more easing.
