MALAYSIA’s services sector is projected to grow 5.5% in 2026, with all sub-sectors expected to register growth, supported by tourism activities, steady trade flows and increased digital adoption.
In the first half of financial year 2026 (1H26), the sector expanded 5.7% and is expected to grow 5.3% in 2H26, underpinned partly by activities related to Visit Malaysia 2026-2027.
The wholesale and retail trade sub-sector is projected to grow 4.6% for the year, supported by household spending, tourism and government assistance programmes, including Sumbangan Asas Rahmah and Sumbangan Tunai Rahmah.
Motor vehicle sales are expected to benefit from new electric vehicle launches and year-end promotions.
The Malaysian Automotive Association has revised its 2026 total industry volume forecast to 800,000 units from 790,000 units, with electrified vehicle sales expected to reach about 120,000 units.
The information and communication sub-sector is forecast to expand 7.8%, driven by demand for digital connectivity, cloud computing, data-intensive services and the continued expansion of data centre activities.
The sub-sector is expected to increase by 7.9% in 2H26.
Major sporting events are also expected to support streaming subscriptions.
Meanwhile, transportation and storage is estimated to grow 7.7%, supported by trade and logistics activities, higher highway traffic, rail ridership and tourism-related travel.
Water transport is expected to benefit from sustained trade activity, while air transport could face headwinds from geopolitical uncertainties in West Asia, elevated fuel costs and potential transboundary haze.
The real estate and business services subsector is expected to expand 6.8%, driven by professional, scientific and technical activities as well as continued investment in data centres, manufacturing and infrastructure development.
A stable overnight policy rate is also expected to support property demand.
Food and beverage and accommodation is projected to grow 7.4%, supported by domestic demand, visitor arrivals and tourism-related events, including meetings, incentives, conferences and exhibitions programmes.
The finance and insurance sub-sector is forecast to grow 2.2%.
Financing activity is expected to benefit from demand for working capital and investment in high value-added industries, while insurance and takaful demand is expected to remain sustained despite higher medical costs and claims.
Household financing activity is also anticipated to remain supported by a conducive labour market and stable financing conditions.
Utilities is expected to expand 5.6%, mainly on higher electricity and water consumption from industrial and commercial activities, particularly electrical and electronic and data centre operations.
The other services sub-sector is projected to grow 5.7%, supported by private healthcare, education, entertainment, recreation and personal services.
Healthcare is expected to benefit from Malaysia Year of Medical Tourism 2026, while private education is supported by higher enrollment, particularly among international students.
Government services, meanwhile, is expected to grow 5.4%.
The sub-sector expanded 6.2% in the first half.
This was supported by the second phase of salary adjustments for public servants, before moderating to a projected 4.7% in 2H26 amid austerity measures aimed at containing operating expenditure.
