PETALING JAYA: Analysts have mostly maintained Malaysia’s full-year 2026 gross domestic product (GDP) growth forecast at 4.3% to 5%, but are likely to upgrade their projections pending the official release of Bank Negara Malaysia (BNM) second-quarter (2Q26) GDP report next month.
Based on the Statistics Department’s recent advance estimates, GDP growth accelerated to 5.8% year-on-year in 2Q26 from 5.4% in 1Q26, attributable to a stronger manufacturing sector and a rebound in the mining and quarrying segment.
The manufacturing sector expanded at its fastest rate in nearly two decades, led mainly by the electrical and electronics (E&E) sector, supported by the ongoing artificial intelligence (AI)-driven semiconductor and investment upcycle.
In a note to clients, Kenanga Research maintained its 2Q26 GDP growth forecast at 5.7% and its full-year 2026 GDP forecast at 4.5% to 5%.
It said domestic demand is expected to increasingly anchor growth in the second half of financial year 2026 (2H26), supported by services activity, AI-related investment, data centre development, continued implementation of approved investments, rising household incomes and low unemployment.
“We expect BNM to keep the overnight policy rate (OPR) unchanged through 2026, so monetary conditions should remain supportive of consumption and investment.
“We maintain our 2026 GDP forecast at 4.5% to 5%, with a bias toward the upper end of the range following stronger 1H26 growth.
“We still expect growth to moderate in 2H26 as temporary tailwinds fade, including the unwinding of front-loading activity, softer trade momentum, and less favourable base effects.”
Meanwhile, Hong Leong Investment Bank (HLIB) Research kept its 2026 GDP growth forecast unchanged at 4.7%, although the stronger-than-expected 2Q26 advance estimate shifted the balance of risks to the upside, alongside potential catalysts stemming from stronger industrial and export activities.
Private consumption is also expected to be anchored by stable labour market conditions, wage growth and sustained fiscal support.
Concurrently, investment activity is expected to moderate, but remain supported by continued realisation of approved investment and the implementation of private and public projects.
With domestic inflation remaining manageable, HLIB Research maintained its view that BNM will keep the OPR unchanged at 2.75% through 2026.
Going forward, Apex Securities Research expects manufacturing will be underpinned by sustained demand for E&E products, while services should remain supported by resilient domestic demand.
It expects growth to moderate in 2H26, with sectoral performance likely to remain uneven as the lagged impacts of supply disruptions become more evident.
“We revise our 2026 GDP growth forecast upward to 5% (previously 4.7%), at the upper end of BNM’s 4% to 5% projection range,” the research house added.
“For 2027, we project preliminary GDP growth of 4.5%, reflecting more moderate macroeconomic conditions.”
According to Phillip Capital Research, the domestic economy continues to demonstrate resilience amid easing global uncertainties.
“We believe the balance of risks remains tilted to the upside, supported by the upside potential in the manufacturing sector,” it said in a report.
Accordingly, the research house will likely upgrade its 2026 GDP growth forecast following the release of the full GDP report next month.
TA Research maintained its view that 2H26 growth is likely to moderate from the strong performance recorded in 1H26.
This reflects the expected normalisation in several key indicators, alongside lingering geopolitical uncertainties that could weigh on global demand and external conditions going forward, it noted.
At this preliminary stage, the research house has made no changes to its 2H26 GDP assumptions, with growth projected at 4.4% y-o-y in 3Q26 and 4% y-o-y in 4Q26.
Meanwhile, an analyst with a local brokerage said external risks will continue to dominate Malaysia’s economic outlook.
The fragile US-Iran ceasefire leaves oil prices exposed to renewed volatility, posing risks to inflation and external demand.
Uncertainty over US tariff policy adds downside risk to exports, while the normalisation of front-loading activity is likely to soften trade and manufacturing momentum in 2H26.
In addition, the El Nino-related weather disruptions will pose risks to agricultural output and food prices, the analyst noted.
