PETALING JAYA: Malaysia’s economic growth is expected to remain resilient in 2026, supported by robust external demand, steady domestic consumption and sustained investment activity.
The country’s expanding role in the artificial intelligence (AI) supply chain, coupled with its position as a net energy exporter, is also expected to provide further impetus to economic expansion.
HSBC Global Investment Research has upgraded its 2026 gross domestic product (GDP) growth forecast for Malaysia to 5.5%, from 5.2%, projecting the economy to expand by more than 5% for the third consecutive year.
The banking group said Malaysia is among only two Asean economies, alongside Singapore, that are benefiting meaningfully from the AI boom, with the country continuing to ride on strong demand for electronics.
“Its electronics exports continue to boom, growing by a record pace of 60% year-on-year (y-o-y), measured on a three-month moving average basis,” HSBC senior Asean economist Yun Liu said.
Bank Negara Malaysia (BNM) is expected to release the third-quarter GDP numbers on Nov 18.
Malaysia’s status as one of only three net energy exporters in Asia also provides an additional growth advantage amid elevated commodity prices, she added.
However, HSBC said the country’s economic outperformance should not be attributed solely to external trade, pointing to sustained contributions from domestic consumption and investment.
It expects both components to remain supportive of growth, although investment expansion has moderated to single digits following two consecutive years of double-digit growth.
“The infrastructure push continues, but many of the projects are nearing the operational phase, while Malaysia has become more selective for private data centre investments, given environmental and regulatory concerns,” Liu pointed out.
On household spending, she noted consumers remained in a relatively stronger position than their regional counterparts, supported by Malaysia’s comparatively low inflation and continued government subsidies.
The recently announced Budget 2027 would further sustain policy support for households next year, she added.
Headline inflation averaged 1.8% y-o-y in the year-to-date period, while core inflation remained relatively benign at around 2%.
This contrasted with regional economies such as the Philippines and Vietnam, which were more exposed to volatility in global commodity prices.
Liu attributed Malaysia’s subdued inflation partly to fuel subsidies, particularly the subsidised RON95 petrol price of RM1.99 per litre, with motorists currently enjoying a monthly quota of 300 litres.
She also noted that stronger economic growth had yet to translate into broad-based inflationary pressure among Asia’s AI beneficiaries.
They include Taiwan, South Korea, Singapore and Malaysia.
On monetary policy, HSBC expects BNM to maintain its overnight policy rate (OPR) at 2.75% at its Nov 5 meeting, despite increasingly hawkish signals from the central bank.
BNM has kept the rate unchanged since September 2025, while removing the word “appropriate” from its description of the monetary policy stance in its latest statement.
Liu interpreted the change as indicating greater flexibility towards monetary policy normalisation rather than a commitment to a fixed rate-hiking cycle.
“We do not believe current underlying inflation is strong enough to trigger BNM to hike imminently,” she said.
Instead, she expects any OPR increase to be a pre-emptive move rather than a response to mounting inflationary pressures, pencilling in a 25-basis-point hike in the first quarter of 2027.
Meanwhile, an economist said Malaysia’s diversified growth drivers, particularly strong domestic demand and its expanding role in the global technology supply chain, would help sustain economic momentum amid external uncertainties.
“While stronger growth could eventually warrant a reassessment of monetary policy, maintaining a balance between supporting economic activity and preserving price stability would remain crucial, he argued.
