KUALA LUMPUR: The economy remains on track to expand by 4% to 5% in 2026, with growth likely to come in towards the upper end of the forecast range, according to Bank Negara Malaysia (BNM) governor Datuk Seri Abdul Rasheed Ghaffour.
He said the government’s early implementation of carefully designed and sequenced reforms had strengthened Malaysia’s foundations while boosting productive capacity and rebuilding fiscal capacity to better position the country for the future.
For example, he pointed to the strong response from investors to Malaysia’s recent US$1.5bil (RM6.1bil) global sukuk issuance, which attracted demand of nearly five times the amount offered.
“Investors were not only willing to commit capital to Malaysia but were also prepared to do so on highly favourable terms, resulting in record-low spreads,” Abdul Rasheed said in his keynote address yesterday at the opening of the two-day Sasana Symposium 2026, which is BNM’s annual thought leadership platform on key economic and financial issues.
He explained that the challenge was to attract the right kind of investment that raised productivity and competitiveness to bring in new technologies, create better jobs and generate greater value than before.
This, Abdul Rasheed said, has shaped much of Malaysia’s investment agenda in recent years through the National Investment Aspirations framework.
Malaysia’s gross domestic product (GDP) expanded 5.8% in the second quarter of financial year 2026 (2Q26), accelerating from the 5.4% growth recorded in 1Q26 and lifting first-half growth to 5.6%.
While headline figures showed the macro progress, Abdul Rasheed acknowledged that for many Malaysians, the cost of living and income inequality remain real concerns.
“Economic growth must also be felt at the dinner table, which is always the ultimate purpose of these reforms.
“For many years, low-cost, low-skilled labour kept us competitive, but a productivity-driven economy requires firms to compete through innovation, technology and capability.
“We must create more high-skilled, high-productivity opportunities in industries of the future such as advanced manufacturing and emerging technologies as well as research and development.”
He highlighted encouraging signs of the increase in the share of high-skilled employment from 27.5% in 2019 to 30.1% in 2025.
“Malaysia’s RM815bil investment pipeline could create close to 245,000 jobs if fully realised, where a sizable number of them are expected to be higher-skilled roles,” he said.
Additionally, Abdul Rasheed said Malaysia’s medium-term economic outlook remains favourable, with growth expected to stay resilient while inflation remains manageable.
“BNM has played its part by preserving the macroeconomic stability that allowed reforms to take hold.
“Low and stable inflation, a sound financial system and orderly financial markets have helped create the conditions conducive for economic transformation,” he said.
In 2025, the economy expanded by 5.2%, while inflation remained contained and the ringgit was the region’s best-performing currency, Abdul Rasheed noted.
He said Malaysia’s structural reforms have helped narrow its fiscal deficit from 6.2% of GDP in 2020 to 3.7% in 2025, rebuilding essential policy space as demands on public resources continue to rise.
Following Abdul Rasheed’s keynote address, the symposium hosted a panel discussion on how Malaysia can navigate near-term challenges, with experts calling for deeper reforms, greater risk-taking and a financial system better equipped to support emerging industries.
Former BNM deputy governor and former OCBC Bank Singapore chairman Datuk Ooi Sang Kuang noted that Malaysia had weathered the Hong Kong property bubble, which triggered a sharp economic slowdown, as well as the Global Financial Crisis, all while the economy and financial system continued to function.
“This did not happen in isolation. It comes down to how we save, allocate and deploy resources efficiently and productively,” he said.
Ooi highlighted Malaysia’s financial resilience was built through years of economic transformation, supported by collaboration between financial institutions, regulators and policymakers.
He pointed to strong risk management frameworks, including risk identification and stress testing, as key to helping the country navigate past crises.
“The global order today is facing significant disruption given the scale of changes ahead, and their impact on economies around the world will be substantial,” added Ooi.
That said, he stressed that the financial sector must however evolve particularly as future industries in technology, innovation and new business models will carry higher risks than traditional sectors.
“Financial institutions must develop the capabilities to understand, assess and manage these risks while also building greater risk appetite to support these emerging areas.“
“Otherwise, the economy’s ability to move into higher-value sectors will be constrained,” Ooi said.
He added that the new phase of economic development will require the supervisory approach to evolve, and Malaysia needs to become a more diversified economy and financial system.
“Financial institutions must support a broader range of asset classes and businesses and not just traditional consumer and corporate lending and cater to small businesses, underserved segments and entrepreneurs,” he said.
Concurrently, Khazanah Research Institute chairman Nungsari Ahmad Radhi noted that Malaysia’s capital market has grown significantly, with the combined size of its debt and equity markets now exceeding twice the country’s GDP.
“Meanwhile, the banking sector assets stand at close to RM1.8 trillion.”
Nungsari explained Malaysia’s underlying challenge lies in effective capital deployment to support innovation and new growth areas.“If it takes RM4 trillion of capital to generate RM2 trillion of output, there is room to improve.
“We need to move beyond simply preserving capital and focus on how capital can generate stronger economic outcomes,” he said.
Additionally, Ooi said financial institutions’ conservative approach is not inherently negative, as it plays a vital role in safeguarding financial and economic stability.
“However, the challenge arises when institutions become overly conservative, limiting opportunities for economic growth and restricting financing for emerging industries,” he pointed out.
Separately, the Prime Minister’s economic adviser Nurhisham Hussein highlighted that building resilience also means preparing for geopolitical and regional security risks that could disrupt trade, investment and supply chains.
He said Malaysia’s openness is both a key strength and a potential vulnerability.
“The biggest geopolitical risk is the possibility of a major conflict between the United States and China.
“Such a scenario would have significant implications for Malaysia, particularly given our reliance on international trade and our strategic location along the Straits of Melaka, one of the world’s most important shipping routes.
“This is a risk we cannot ignore,” he stressed.
