PETALING JAYA: Demand destruction in Malaysia’s trading partners will begin to outweigh the benefits of higher energy prices enjoyed by the country, according to BMI.
“A key risk we highlight is the possibility of an extended conflict (in the Middle East), beyond our current base case scenario of mid-May, which appears increasingly likely,” it said in a note.
BMI, a unit of Fitch Solutions, also warned that Bank Negara Malaysia (BNM) could cut interest rates, should growth begin to disappoint.
“Risks to our rate forecast are skewed towards an earlier cut.
“Nevertheless, we suspect the central bank will probably wait for clearer signals of a slowdown before acting.”
BMI said it remains “confident” BNM will leave the overnight policy rate (OPR) on hold at 2.75% for the rest of the year.
“Still-resilient growth and benign inflation suggest that there is little impetus to move monetary policy in either direction,” it added.
In the May 7 meeting, the Monetary Policy Committee kept the OPR unchanged at 2.75%. This was in line with market expectations.
“While the central bank struck a somewhat more cautious tone, its policy statement remained relatively similar to last, particularly with respect to forward guidance. The central bank’s confidence in the economy remains intact, noting ‘sustained domestic demand and strong export performance’.
“Indeed, the domestic outlook remains strong, with services wages rising for the seventh consecutive quarter to touch 5% year-on-year (y-o-y) in the fourth quarter of 2025 while the unemployment rate sits at a 12-year low at 2.9% in February 2026,” added BMI.
The research house expects Malaysia’s economic growth to moderate in the coming quarters as front-loading activity fades and as the pace of investment realisation slows. That said, there is little concern on the inflation front.
“Headline inflation has edged higher from 1.4% y-o-y in February 2026 to 1.7% in March as unsubsidised fuel prices spiked.”
