KUALA LUMPUR, Oct 17 — Kenanga Investment Bank Bhd (Kenanga IB) has revised Malaysia’s full-year 2025 gross domestic product (GDP) forecast higher to 4.5 per cent from 4.3 per cent, given the higher-than-expected advance GDP estimates for the third quarter of 2025 (3Q 2025).
It said that GDP growth in 2026 is likely to moderate to 4.2 per cent, reflecting weaker external demand due to higher United States (US) tariffs in the first half of 2026.
“Nevertheless, steady domestic demand and stronger services exports, driven by Visit Malaysia 2026, should offset some drag.
“The rollout of Budget 2026, and various ongoing policy frameworks, and the 13th Malaysia Plan (13MP) projects, will provide additional fiscal and investment support to sustain domestic growth,” Kenanga IB said in a note today.
The country’s growth continues to be anchored by domestic-oriented sectors, driven by rising household incomes boosted by higher minimum wages and targeted cash transfer, as well as higher tourist arrivals and spending ahead of Visit Malaysia 2026.
“The ongoing investment upcycles, bolstered by national policy frameworks such as the New Industrial Master Plan 2030, National Energy Transition Roadmap, and the 13MP, will further underpin growth.
“The mining sector’s recovery from earlier supply disruptions and resilient private consumption, aided by a favourable policy rate and seasonal spending, also strengthens the domestic growth narrative,” it said.
Kenanga IB also noted that external uncertainties remain a concern for Malaysia, with US President Donald Trump’s trade stance continuing to cloud global trade and growth prospects, posing downside risks to Malaysia’s export-oriented economy.
“Domestically, risks appear more contained, with subsidies still accessible to most Malaysians through the targeted mechanism.
“However, rising business costs, particularly from the Sales and Service Tax expansion, e-Invoicing, and the mandatory two per cent Employees Provident Fund contributions for foreign workers effective October 2025, could weigh on corporate margins,” it said.
Meanwhile, OCBC Global Markets Research has revised its 2025 GDP growth forecast higher to 4.6 per cent year-on-year (y-o-y) from 3.9 per cent, given that GDP growth averaged 4.7 per cent y-o-y for the first three quarters of 2025.
The forecasts imply a slowdown to 4.3 per cent y-o-y in 4Q 2025, but for 2026, the bank’s research arm maintains its more conservative GDP growth estimate of 3.8 per cent.
“We expect much of the slowdown to be driven by weakening external demand.
“While export growth has been surprisingly resilient for much of 2025, supported by the electronics upcycle, the impact of tariffs on exports will only be felt from August 2025 onwards for goods with higher reciprocal tariffs and from October-November 2025 onwards for sector-specific tariffs,” it said in a separate note today.
Furthermore, in its research note, CIMB Investment Bank Bhd opined that, given the robust 3Q 2025 GDP outturn, Bank Negara Malaysia would likely maintain the overnight policy rate at 2.75 per cent in its final Monetary Policy Committee meeting in November.
Earlier, the Statistics Department reported that Malaysia’s economy is projected to grow by 5.2 per cent in 3Q 2025, based on advance GDP estimates, up from the 4.4 per cent growth in the previous quarter.
