KUALA LUMPUR: Asian Development Bank (ADB) projects Malaysia's economy to grow by 4.6 per cent in 2026 and 4.5 per cent in 2027.
The positive projection is supported by strong consumption and household spending, although significant downside risks remain if the conflict in West Asia is prolonged.
ADB Southeast Asia Department, principal regional cooperation officer, Dulce Zara, said the rise in artificial intelligence (AI) related and electronics exports, coupled with investments in data centres, would also help to support the economy.
"Now that the government is funding the next development plan (13th Malaysia Plan) and raised its growth this year to around five per cent, I believe our forecast is fairly reasonable, and we are (already) seeing an upside for Malaysia," she said during the Asian Impact Webinar, in conjunction with the release of the Asian Development Outlook (ADO) April 2026, today.
The ADO April 2026 explains how fast economies (like Malaysia) are expected to grow and what risks could affect them.
However, Zara cautioned that, due to ongoing tensions in West Asia, some vulnerabilities would remain, with a rise in oil prices causing the government to bear a higher subsidy burden, which would then drain public finances.
Meanwhile, the ADO report stated that inflation would remain manageable, projecting at 1.8 per cent for this year and 1.9 per cent in 2027, as pass-through effects from fiscal policy reforms have been contained.
"Some upward pressures may result from tariff adjustments and the delayed impacts of the higher sales and services tax.
"Additionally, rising oil prices may raise production costs and eventually lead to higher prices for goods," said the report.
On currency, the ringgit is expected to strengthen, averaging 4.00 per US dollar, reflecting stronger confidence in the domestic economy and investment climate.
Meanwhile, in developing a more high-skilled workforce, it said the country needs a comprehensive strategy to overcome structural constraints.
Among them are strengthening industry-education partnerships, expanding public-private partnerships to fund training programmes, tax incentives, targeted scholarships for women and informal workers, and developing competitive career pathways to curb brain drain. - Bernama
