THE economy is projected to expand between 4.2% and 5.2% in 2027 from between 4.8% and 5.3% this year supported by sustained domestic demand, favourable labour market conditions, continued income growth and firm investment activity. The outlook is subject to external risks such as geopolitical tensions, shifts in international trade policies and global financial market volatility.
From the domestic economy, private consumption will remain a key growth driver supported by sustained household purchasing power and continued expansion in tourism, retail, transportation and other services in conjunction with the extended Visit Malaysia Year, which has been extended to 2027 from 2026.
Investment activity is expected to remain robust, underpinned by the realisation of approved investments and strategic initiatives of the Thirteenth Malaysia Plan or 13MP, New Industrial Master Plan 2030, National Semiconductor Strategy and National Energy Transition Roadmap. The services sector will continue to be the primary growth driver, while the manufacturing sector will benefit from the technology upcycle and expansion of high-value activities, particularly in semiconductors and electrical and electronic industries.
These developments, together with stronger domestic linkages and productivity-enhancing investments, are expected to strengthen Malaysia's productive capacity and support more balanced, inclusive and sustainable growth.
Growth of the Malaysian economy in 2026 will be underpinned by resilient domestic demand amid a challenging external environment. Domestic demand will remain the key driver, supported by sustained private consumption, favourable labour market conditions and continued consumer confidence.
Strong private sector spending and continued implementation of strategic projects will continue to support investment activity through the rest of this year while on the supply side, growth will be led by the services and manufacturing sectors. The services sector will benefit from sustained tourism-related activities, steady trade flows alongside adoption of digital technology, while the manufacturing sector will be bolstered by stronger demand for products and continued expansion in high-value activities.
Globally, economic growth is expected to expand 3.4% in 2027 from 3% this year mainly supported by accelerated demand-driven momentum in the global technology sector resulting from advances in artificial intelligence (AI). Conflict in the Middle East will continue to weigh on energy importers and vulnerable economies, making the global growth outlook while AI-driven demand will elevate countries that are integrated into the global technology value chain.
Growth in advanced economies is expected to expand modestly while emerging markets and developing economies will continue to be the major driver of global economic activities.
The expansion is also supported by easing inflation and gradually less restrictive monetary policy, providing added impetus to investment and trade activities. Global trade continues to face increasing fragmentation as inward-looking policies especially through higher tariffs weigh on cross-border economic activities. For Malaysia to sustain economic growth, it will have to continue diversifying export markets, strengthen regional integration and enhance supply chain resilience, while preserving macroeconomic and financial stability.
