KUALA LUMPUR, Sept 25 — Malaysia's 2026 gross domestic product (GDP) growth is projected at 5.4 per cent, underpinned by continued strength in domestic demand coupled with strong trade performance, said RHB Investment Bank Bhd (RHB IB).
Growth momentum remains firm despite lingering external headwinds, underpinned by robust high-frequency indicators, particularly exports and industrial production.
Its RHB Leading Economic Index continues to signal 5.0–5.2 per cent growth in the second half of 2026, while resilient domestic demand and sustained electrical and electronics (E&E) exports should support growth for the remainder of the year.
“While geopolitical and tariff-related risks remain, Malaysia’s diversified economic structure and efforts to diversify export markets should provide some buffer against external shocks.
“On the domestic front, private consumption is likely to remain firm, supported by healthy labour market conditions, income growth and policy support, while private investment is set to stay robust due to infrastructure rollouts, data-centre developments and manufacturing expansion,” RHB IB said in a research note today.
It noted that digitalisation and automation will provide an additional lift to investment, particularly in manufacturing and information and communication technology.
Services and construction are also poised to benefit from strong domestic demand and ongoing investment, while manufacturing remains on a positive trajectory, underpinned by resilient domestic demand and sustained global E&E demand, although external conditions and input-cost pressures remain key risks.
Additionally, the bank has revised its 2026 headline inflation forecast to 1.9 per cent from 2.1 per cent, reflecting softer-than-expected price pressures.
Inflation averaged 1.8 per cent in the first eight months of the year, alongside the restoration of the BUDI95 monthly quota and an increase in the diesel subsidy quota from September.
For the remainder of 2026 and into 2027, RHB IB emphasised that the inflation trajectory will be shaped by global commodity price movements, changes in domestic policies, and potential upside risks from food inflation.
It noted that lingering geopolitical tensions and prolonged Strait of Hormuz disruptions have raised upside risks to crude oil prices, while broad-based increases in producer prices point to building upstream cost pressures.
“However, the pass-through to consumer prices should remain gradual given the lag in transmission and continued price controls and subsidies, with inflationary pressures expected to remain manageable, supported by stable demand, a relatively stable ringgit, and domestic policy measures.
“We expect the central bank to deliver a token 25 basis point hike in the first half of 2027, which we see as a normalisation move towards a more neutral policy setting rather than a response to significant inflationary pressures,” RHB IB said.
