PETALING JAYA: The second half of financial year 2026 (2H26) will likely see a moderation after a strong first quarter, says Hong Leong Investment Bank Bhd (HLIB).
HLIB chief economist Felicia Ling said growth is expected to moderate, but a stronger electrical and electronics (E&E) sector performance has prompted an upward revision to Malaysia’s 2026 gross domestic product forecast to 4.7%, from a previous estimate of 4.5%.
According to Ling, there are three sectors that will underpin this outlook, namely construction, manufacturing and services.
She noted the global semiconductor market is projected to grow 90% this year.
For the E&E sector, this upswing has fed directly into stronger Malaysian export performance, with electronic integrated circuits accounting for the largest share of E&E export growth.
“The analysis noted that this export strength is expected to translate into positive growth in industrial production for the manufacturing sector, as Malaysia’s E&E export trends continue to track closely with the global chip sales cycle,” Ling said during the economic outlook webinar by Institute of Chartered Accountants in England and Wales.
For the services sector, its key driver will be resilient household spending.
“Services sector wages also climbed to RM7,592 in the first quarter of financial year 2026, reflecting continued income growth supporting the sector’s momentum,” Ling pointed out.
The construction sector has been buoyed by ongoing infrastructure projects and data centre-related investments.
“Approved investments have maintained a strong upward trend, reaching RM431.1bil in 2025, supported largely by robust inflows into ICT projects tied to data centres.
“Crucially, the key drivers of investment have shifted from an earlier E&E-led cycle towards data centre investment – a trend with direct implications for capital allocation, supply chains, and workforce planning across sectors,” Ling added.
KPJ Healthcare Bhd
and ICAEW Fellow, Mohd Khairul Izzad Mohammed Shamsudin said for businesses outside of the technology sector, the data centre investment wave is a reminder that structural shifts create both opportunity and cost.
“Resilience requires investment – in supply chain diversification, in buffer stock, in retaining good people. But disciplined capital allocation remains essential.
Without visibility of demand, we should not continue to deploy capital, and that requires the kind of financial rigour and business acumen that cuts across every sector, not just tech,” he said.
Meanwhile, on fiscal policy, HLIB said it increased slightly to 3.6% from 3.5%, though the overshoot is expected to be largely managed.
There was also a significant revision to the government’s petrol and fuel subsidy that went from RM15bil to RM40bil.
Ling said this is a substantial adjustment finance professionals will want to factor into their fiscal outlook assumptions.
Bank Negara Malaysia is expected to maintain the overnight policy rate at 2.75% through 2026.
