KUALA LUMPUR, Oct 15 — Malaysia’s economy is expected to sustain growth of above four per cent in 2025 and 2026, driven by resilient domestic demand, major infrastructure projects and ongoing structural reforms, said Malaysian Rating Corporation Bhd (MARC Ratings).
Its chief economist Ray Choy said the agency forecasts gross domestic product (GDP) growth at 4.2 per cent in 2025 and 4.0 per cent in 2026, reflecting steady expansion despite global headwinds.
“In 2025, our in-house forecast would be 4.2 per cent GDP growth, and we are expecting a very slight alteration to about 4.0 per cent for 2026,” he said during his presentation at MARC360 Reflections: Analyses of Malaysia’s Budget 2026 and Post-Budget Debates webinar today.
The nation's diversified economic structure, spanning services, manufacturing, and the electrical and electronics industries, would continue to underpin resilience, while fiscal consolidation and governance reforms would strengthen macroeconomic fundamentals.
“Malaysia’s robust economic growth will continue to be supported by key developments and policy initiatives, including the Johor-Singapore Special Economic Zone, the Rapid Transit System Link, Penang Light Rail Transit, the Pan Borneo Highway, and the East Coast Rail Link,” Choy said.
On Budget 2026, he described it as innovative, noting that it explicitly co-opts government-linked companies (GLCs) and government-linked investment companies (GLICs) into national development efforts.
“It was very innovative with regards to co-opting the GLCs and GLICs to make it clear that the importance of public–private partnerships is major in driving overall development.
“That will reduce some of the disconnect in goals and ensure spending is channelled into projects with positive return on investment (ROI) and good project economics,” Choy said.
While Malaysia continues to maintain a framework of deficit control, the country still has sufficient fiscal and monetary levers to navigate uncertainty, including the potential for monetary easing should global conditions deteriorate.
“Malaysia’s Consumer Price Index (CPI) is trending low. The subsidy retargeting did not result in conventionally expected CPI outcomes. Because of the very low CPI, there is potential for monetary easing to be possible,” he said.
Choy cited the importance of strengthening external resilience amid increasingly fragmented global trade and geopolitics, adding that Malaysia’s Asean chairmanship in 2025 presents a valuable opportunity to position the country as a regional driver of economic cooperation.
“Because of emerging geo-economic fault lines and geopolitical fractures globally, the whole idea of strengthening our external resilience will be very important for the next decade, as well as how we leverage our role as Asean chair,” he said.
As for Malaysia’s debt sustainability, Choy said it remains strong, supported by healthy GDP growth and fiscal reforms under the Public Finance and Fiscal Responsibility Act 2023 and the Government Procurement Act 2025.
“Malaysia’s growth continues to outpace its debt-servicing cost, and reforms to expand revenue and control expenditure are steering the country towards a more sustainable fiscal path,” he said.
Meanwhile, OCBC Bank senior Asean economist Lavanya Vekataswaran said Budget 2026 hits all the right notes by balancing fiscal prudence with flexibility to respond to global uncertainties.
“It allows the government some room to also be a bit nimble in terms of allocations as we go along because it has provided for tax revenue growth and less reliance on non-tax revenues.
“So, overall, it hits all the right notes, but we will have to navigate uncertainty going forward,” she said.
