KUALA LUMPUR: Malaysia’s economy is expected to grow by 4.6 per cent to 4.9 per cent over the next three years, supported by household consumption, artificial intelligence-related investments, and technology exports, said S&P Global Ratings.
In a research note, the American credit rating agency said Malaysia’s position as a net energy exporter and the presence of broad subsidies help cushion borrowers from oil price shocks.
"We forecast a modest rise in the banks' non-performing loan (NPL) ratio of 10 to 20 basis points by end-2027, to 1.6 per cent, from a multi-year low of 1.4 per cent at end-2025.
"Strong corporate and household sector balance sheets underpin healthy asset quality. However, there could be some increase in new NPLs from small and medium enterprises (SMEs) and lower-income households,” it said.
S&P Global Ratings said Malaysia’s credit losses could increase to 0.2 per cent to 0.3 per cent of total loans, up from a multi-year low of 0.1 per cent in 2025, following the restructuring of a large corporate account.
Accordingly, it anticipates that banks will set aside higher macroeconomic overlays for the rest of 2026 due to heightened geopolitical risks. It said the impact will vary, as some banks have retained pandemic-era overlays.
The ratings agency said SMEs are a key driver of credit growth for Malaysian banks, as credit growth in the SME sector stood at 10.9 per cent in 2025, significantly higher than the overall average credit growth of 4.8 per cent.
"We believe growth is likely to stay high as banks prioritise better risk-adjusted returns amid intense competition in mortgages and hire purchase financing, alongside a shift in corporate borrowing towards the bond market.
"The share of SME financing in total bank financing rose to about 18.5 per cent at end-2025 from 16.5 per cent at end-2021,” it added. - Bernama
