KUALA LUMPUR, Dec 23 — Malaysia’s gross domestic product (GDP) growth in 2026 is expected to moderate to 4.2 per cent from an estimated 4.8 per cent in 2025, said Kenanga Investment Bank Bhd (Kenanga IB).
It said domestic demand and continued expansion in the services sector would remain the main drivers of growth.
External uncertainties will remain a key challenge in 2026, particularly due to ongoing United States (US) tariff measures.
“Nevertheless, resilient domestic demand amid continued spending, steady investment flows and continued targeted government support should cushion these external pressures and sustain a stable and sustainable growth trajectory,” Kenanga IB said in a research note.
It added that domestic demand is expected to continue underpinning growth, alongside strong tourism inflows, stable labour market conditions, and moderate gains in trade activity.
Distributive trade sales would grow by 6.1 per cent in 2026, compared with an estimated 5.7 per cent in 2025 and 5.5 per cent in 2024.
“Sales momentum has remained strong, averaging 5.3 per cent year-on-year in the first ten months of 2025, supported by festive spending, rising tourist arrivals and the Sumbangan Asas Rahmah (Sara) RM100 one-off cash transfer,” Kenanga IB said.
The labour market is expected to remain stable in 2026, supported by higher minimum wages, continued job creation in the services sector and the implementation of approved investments.
“We maintain our unemployment rate forecast at 3.0 per cent for 2026, in line with the stable labour market conditions observed in 2025 (3.0 per cent) and 2024 (3.3 per cent),” it said.
On the external front, Kenanga IB expects performance to remain moderate in 2026, with export growth easing to 5.1 per cent from an estimated 6.0 per cent in 2025 (2024: 5.8 per cent).
Exports grew 6.1 per cent in the first eleven months of 2025, amid weaker mining shipments, supply disruptions, softer commodity prices and a stronger ringgit, which affected price competitiveness for certain export commodities.
“Looking ahead, external pressures are expected to intensify in 2026 as US tariff effects materialise and China’s economic recovery remains slow, placing additional pressure on commodity-related exports.
“Front loading to the US in 2025 may unwind in 2026 as orders normalise,” it said.
