KUALA LUMPUR, July 6 — Malaysia’s gross domestic product (GDP) is projected to grow by 4.7 per cent in 2026, with a modest upside bias, supported by stronger-than-expected export performance, resilient domestic demand and easing external risks, according to RHB Investment Bank Bhd (RHB IB).
The country’s growth momentum remains firm despite lingering external headwinds, underpinned by robust high-frequency indicators, particularly exports and industrial production, RHB IB said in a note today.
“Domestic demand is expected to remain resilient, supported by favourable labour market conditions and steady income growth,” it said.
Private investment is expected to remain resilient, driven by ongoing digitalisation and sustained investment in the manufacturing and information and communication technology sectors.
Meanwhile, public investment will continue to be supported by utilities, energy and transport-related infrastructure projects.
RHB IB said it remains constructive on Malaysia’s export outlook, underpinned by resilient external demand and sustained strength in the electrical and electronics (E&E) sector amid the technology upcycle and AI-driven investment cycle.
At the sectoral level, growth is expected to remain broad-based. Industries that interact directly with customers will be supported by resilient household spending. Manufacturing will benefit from stronger E&E demand and a shift towards higher value-added activities, and construction will remain robust on the back of industrial, logistics, and infrastructure developments.
RHB IB, nonetheless, cautioned that Malaysia’s economic growth could slow to 4 per cent should geopolitical tensions re-escalate in the second half of 2026.
Meanwhile, it maintained its 2026 headline inflation forecast at 2.1 per cent, citing geopolitical tensions and lower crude oil prices, which have moderated near-term inflationary pressures. It said the gradual normalisation of global energy supply conditions should continue to ease cost pressures.
“Nevertheless, inflation dynamics warrant close monitoring amid emerging upstream cost pressures,” it said.
Inflation outlook will be shaped by commodity price developments, domestic policy measures and potential food price pressures arising from El Niño-related weather disruptions, it said.
On monetary policy, RHB IB expects the overnight policy rate (OPR) to remain unchanged at 2.75 per cent throughout 2026, supported by resilient economic fundamentals and manageable inflation.
“Should inflation exceed the official forecast range of 1.5 to 2.5 per cent, with potential upside to around 3.2 per cent in the event of a geopolitical tension re-escalation, a 25-basis-point rate hike cannot be ruled out,” it said.
On the currency, RHB IB expects the ringgit versus the US dollar to ease towards 4.00 to 4.05 by end-2026.
The current hawkish United States Federal Reserve repricing of its policy should fade when energy-led inflation pressure moderates and geopolitical risk premia recede.
It noted that a prolonged spike in oil prices driven by supply disruptions will be challenging due to imported inflation and weaker global risk sentiment, although Malaysia’s exposure to energy and commodity sectors will provide a partial offset relative to regional peers.
