PETALING JAYA: Bank Negara Malaysia (BNM) has struck a cautiously optimistic tone on the economy by keeping the country’s growth forecast unchanged for now.
Analysts broadly echo the central bank’s view that resilient domestic demand and continued export activity will anchor growth.
BNM expects the economy to expand by 4% to 5% year-on-year (y-o-y) in 2026, a touch more upbeat than the Finance Ministry’s narrower 4% to 4.5% projection.
The forecast is seen as within reach, as long as the Middle East conflict does not deteriorate further and unleash wider knock-on effects.
On March 31, US president Donald Trump said that American forces would leave Iran within “two to three weeks”.
Post-briefing with BNM, CGS International (CGSI) Research said the central bank presented various oil price scenarios. It also repeatedly admitted that the fluidity of the present situation could alter its forecasts.
“However, we see the core message for 2026 remains consistent – that domestic demand is anchoring growth – with a more constructive view on the ringgit and Malaysia’s export strength.
“We keep our 2026 gross domestic product (GDP) forecast of 4.8% y-o-y, which is at the higher end of BNM’s forecast range.
“We think there is still a possibility that Malaysia could weather the crisis better than the market expected, even as the US-Iran war prolongs, amid its favourable fiscal space and robust export momentum,” said CGSI Research.
Meanwhile, Hong Leong Investment Bank (HLIB) Research said BNM anticipates the economy to remain close to its potential, with a marginally positive output gap.
In the near term, potential output will remain supported by capital accumulation and productivity gains amid higher investments in information, communication and technology, as well as the electrical and electronic (E&E) sectors.
It added that the central bank highlighted downside risks from geopolitical uncertainties and US tariffs, as well as potential deceleration in the global artificial intelligence momentum.
On the flip side, upside risks to growth include stronger-than-expected global growth and robust demand for E&E products, coupled with improved tourism activity.
“Following the impact of the Iran war, we are revising our 2026 GDP forecast to 4.5% from 4.7%, while raising our inflation forecast to 2% (previously: 1.7%) and maintaining our expectation for BNM to hold the overnight policy rate at 2.75%.
“We expect some upward pressure on RON97 and unsubsidised diesel prices as well as food prices from higher commodity costs amid unfavourable weather conditions,” HLIB Research said.
Despite the cautiousness amid uncertainties, BIMB Securities Research thinks there is “scope for upside” to the economic outlook. This would materialise particularly if primary sectors such as agriculture and mining outperform expectations and return to a firmer growth trajectory, underpinned by sustained strength in global commodity prices.
Elevated crude oil and crude palm oil prices would enhance income generation, strengthen production incentives and boost export earnings, thereby reinforcing the contribution from these sectors.
“At the same time, a less severe-than-anticipated implementation of US tariff measures could provide an additional lift to external demand and trade activity.
“Taken together, these factors point to a potential skew of growth outcomes toward the upper bound of BNM’s forecast range,” stated BIMB Securities Research.
