PETALING JAYA: The second quarter of financial year 2026 (2Q26) economic growth is likely to come in close to the Statistics Department’s advance estimate of 5.8%, although stronger-than-expected economic indicators have raised the possibility of an upside surprise towards 6%, with the official figures due at noon today.
Sunway University economist Yeah Kim Leng said the official gross domestic product (GDP) reading is likely to remain broadly in line with the advance estimate, with any revision expected to be marginal.
“The flash estimate has already provided an upside surprise,” he told StarBiz.
“Unless there is a strong surge, especially in the June numbers, we are likely to be broadly in this 5.8%, close to the 5.8% number.
“If there’s any variation, it’s likely to be very small, around 0.1 percentage point.”
He said the data would nevertheless “affirm” the Malaysian economy’s resilience, having sustained growth despite ongoing global uncertainty and elevated energy prices.
The Statistics Department’s advance estimate showed the economy grew 5.8% year-on-year (y-o-y) in 2Q26, accelerating from 5.4% in 1Q26 and bringing first-half (1H) growth to 5.6%.
Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid, however, said recent economic indicators suggested the final figure could surprise on the upside.
“The external demand has been quite robust and the domestic demand remains resilient,” he noted.
“Our baseline is that the 5.8% could be retained as indicated in the advance estimates, but we would not totally rule out much higher growth.”
TA Research similarly sees a possibility of GDP growth approaching 6% in 2Q26, citing stronger-than-expected activity across several sectors.
The research house noted that Malaysia’s services volume index rose 5.9% y-o-y to 170.1 points in 2Q26, led by the information and communication, transportation and storage, and other services subsectors.
“We would like to highlight that the volume index of services came in stronger than expected, suggesting that services sector growth could exceed the Statistics Department’s 2Q26 advance estimate of 5.4% y-o-y,” it said in report yesterday.
Yeah, meanwhile, said the strength in services was likely supported by tourism and education, as reflected by Malaysia’s services balance swinging from a deficit to a surplus.
He said data centres (DCs) were unlikely to have contributed meaningfully at this stage, as many approved projects remained in the early phases of development.
“DCs are digital services, but it is still too early for them to contribute significantly to the turnaround,” he said.
Nevertheless, he expects the sector to become an increasingly important contributor to Malaysia’s services exports as more projects come onstream.
TA Research also highlighted the sharp turnaround in mining, which expanded 9.4% y-o-y in 2Q26, while manufacturing growth accelerated to 7.4% from 5.7% in the preceding quarter.
It said manufacturing continued to benefit from resilient domestic activity and sustained external demand.
On the demand side, it said the distributive trade index, a proxy for personal consumption expenditure, expanded 4.8% y-o-y in 2Q26, slightly slower than the 4.9% growth in 1Q26.
Despite the slight moderation, TA Research said distributive trade activity remained resilient, suggesting that household spending continued to support domestic demand.
“Coupled with the strong net export performance during the quarter, the demand-side indicators broadly complement the positive signals observed on the supply side, reinforcing expectations of a solid economic performance in 2Q26,” it said.
Separately, Hong Leong Investment Bank (HLIB) Research expects 2Q26 GDP growth to come in at 5.9% y-o-y.
“Growth is expected to be driven by stronger manufacturing and mining output, alongside continued expansion in services and construction,” it said in a note to clients yesterday.
“On the demand side, we anticipate growth to be driven by stronger net exports, with domestic demand remaining resilient despite geopolitical headwinds from the US-Iran war.”
HLIB Research expects growth to moderate in 2H26 due to high base effects, although robust external demand for electrical and electronics (E&E) goods and resilient domestic demand should continue to provide support.
Yeah likewise expects growth to moderate in 2H26, with geopolitical risks and oil prices remaining key downside risks.He said uncertainty surrounding the US-Iran conflict and volatile energy prices could weigh on global growth, particularly if oil prices remain elevated for an extended period.
However, he noted that expectations of a more durable peace agreement had improved, reducing the likelihood of a prolonged escalation and providing some relief to the global economy.
“The increased expectation of a peace deal, rather than escalation, provides some positive lining to 2H global performance,” he said.
“However, the concern here is, of course, oil prices currently creeping up and whether they will reach a level that will depress the global economy again.”
Yeah said efforts by businesses to diversify supply chains away from excessive reliance on the Middle East had also helped ease supply risks, making the global economy more resilient than during previous energy shocks.
He said this could moderate any sharp deterioration in economic and financial conditions in 2H.
At the same time, Yeah said continued investment in artificial intelligence (AI) infrastructure and services was expected to remain a key source of global growth.
For Malaysia, he said the AI boom had already translated into stronger semiconductor exports, providing a major boost to 1H economic performance.
Malaysia’s total trade expanded 22.4% y-o-y to RM1.8 trillion in the first six months of 2026, with exports rising 27.5% to RM971.59bil and imports increasing 16.9% to RM824.44bil.
E&E products accounted for 54.5% of exports, totalling RM467.95bil compared with RM328.47bil a year earlier, while E&E imports rose to RM348.45bil from RM269.64bil.
The trade surplus consequently widened 159.8% to RM147.15bil in 1H26, with the E&E sector alone generating a surplus of about RM119.5bil, equivalent to 81.2% of the overall trade surplus.
Against this backdrop, Yeah said Malaysia remained relatively well-positioned to weather external headwinds, supported by resilient domestic demand and sustained global demand for semiconductors and AI-related products.
