Kuala lumpur: Malaysia's consumer spending is expected to grow in 2026, driven by stable economic growth and a favorable employment outlook, according to BMI, a Fitch Solutions company.

According to BERNAMA News Agency, BMI's statement revealed that household spending is anticipated to increase by 4.2 percent year-on-year (y-o-y) in real terms, reaching RM1.10 trillion at 2010 prices, surpassing the pre-COVID-19 value of RM779.7 billion in 2019. The growth is supported by a tight labor market, with real wage growth expected to outpace inflation, thereby bolstering purchasing power throughout the year.

BMI projects that in 2027, total household spending will grow at a real rate of 4.1 percent y-o-y, reaching RM1.14 trillion. However, spending could be constrained by high debt levels and related servicing costs, as Bank Negara Malaysia is anticipated to maintain the overnight policy rate at 2.75 percent for the year.

The report further forecasts Malaysia's economic growth to average 4.3 percent y-o-y in 2026, maintaining stability with a real GDP growth of 4.0 percent y-o-y in 2027. Malaysia's status as a net energy exporter will bolster export earnings. Stronger petroleum-related revenues and dividends from Petroliam Nasional Bhd (Petronas) are expected to offset rising subsidy costs and support fiscal consolidation, though this may lead to contractionary fiscal policy, reducing household disposable income.

The employment rate is expected to average 3.1 percent of the labor force over both 2026 and 2027, driven by strong foreign investments, a recovering tourism sector, and increased activity in sectors such as agribusiness, electronics, and manufacturing. However, BMI cautions that if economic conditions deteriorate, particularly with a potential slowdown in China's growth, there could be a risk of rising unemployment, impacting consumer confidence and spending.