PETALING JAYA: Analysts are broadly positive that the economy will continue to be anchored by growth in real industrial output but cautioned that prolonged geopolitical uncertainties may weigh on expansion activities.
Economists maintained their forecasts for Malaysia’s gross domestic product (GDP) outlook this year following the release of March industrial production index (IPI) data showing a steady 3.1% expansion of industrial activities similar to February.
The March IPI growth missed the median consensus of 3.5% while for the first quarter of financial year 2026 (1Q26), IPI grew 4%, easing from 4.9% in 4Q25.
The IPI’s manufacturing sector gauge, making up almost two thirds of the index, grew 5.5% in March while sale value grew 5.3% to RM173bil.
Electricity generation grew 4.9% while the mining sector gauge contracted for the second month in a row.
Hong Leong Bank Investment Research said the manufacturing purchasing managers index (PMI) rose to 52.6 in April from 51.8 in March supported by an upturn in output and new orders, though demand was partly distorted by firms front-loading their purchases ahead of expected supply constraints and input cost pressures.
The global manufacturing PMI signals that production activities continue to be supported while a rise above the 50-point level indicates orders for goods and sentiment remains positive.
“Looking ahead, while these potential supply chain disruptions continue to weigh on Malaysia’s commodity-related production, the electrical and electronics sector remains a strong buffer amid the global tech upcycle.
“As such, we maintain our 2026 GDP growth forecast at 4.5%,” it added.
TA Research said the coming Friday’s official 1Q26 GDP release would provide further clarity on economic growth momentum going into 2Q26.
The preliminary 1Q26 GDP showed a 5.3% growth, moderating from 6.3% in 4Q25.
“At this stage, we maintain our 2026 GDP growth forecast at 4.3% to 4.7% under the base-case scenario,” it said.
“Manufacturing activity stayed relatively resilient, but continued weakness in the mining sector, partly due to supply disruptions, weighed on overall output.
“The softer IPI performance was in line with expectations of slower economic growth in 1Q26,” it said, pointing out that GDP growth for the quarter would likely ease to below 5.5%.
It said while geopolitical tensions could temporarily lift oil prices and increase market volatility, the overall impact on Malaysia’s industrial sector would depend on how long the disruption lasts and how quickly global energy markets stabilise.
“A short-term shock would likely lead to temporary cost pressures, while a prolonged conflict could weigh on industrial activity through higher input costs, weaker external demand, and continued supply chain uncertainties,” it said.
“The mining sector remains vulnerable to production disruptions that may delay its near-term recovery.”
Apex Research has kept this year’s GDP growth forecast to 4.7%.
“We expect growth to remain firm at 4.9% in the first half of financial year 2026 (1H26) before moderating to 4.4% in 2H26 amid a more challenging and uncertain macro environment.”
“We remain cautiously optimistic on the domestic manufacturing outlook.
Front-loading and stockpiling activities should help cushion short-term risks from raw material supply disruptions, barring a prolonged deterioration in the availability of key industrial inputs,” it added.
