Kuala lumpur: Malaysia's gross domestic product (GDP) is projected to grow 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.
According to BERNAMA News Agency, domestic demand is expected to remain resilient, supported by favourable labour market conditions and steady income growth. Private investment is anticipated to remain stable, driven by ongoing digitalisation and sustained investment in the manufacturing and information and communication technology sectors. Meanwhile, public investment will continue to be bolstered by utilities, energy, and transport-related infrastructure projects.
RHB IB remains optimistic about Malaysia's export outlook, underpinned by resilient external demand and sustained strength in the electrical and electronics (E and E) sector amid the ongoing technology upcycle and artificial intelligence (AI)-driven investment cycle. At the sectoral level, growth is expected to remain broad-based, with industries interacting directly with customers supported by resilient household spending. Manufacturing is poised to benefit from stronger E and E demand and a shift towards higher value-added activities, while construction is expected to remain robust due to industrial, logistics, and infrastructure developments.
RHB IB, nonetheless, cautioned that Malaysia's economic growth could slow to 4.0 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. The gradual normalisation of global energy supply conditions is expected to continue easing cost pressures.
Inflation dynamics warrant close monitoring amid emerging upstream cost pressures, with the inflation outlook shaped by commodity price developments, domestic policy measures, and potential food price pressures arising from El Ni±o-related weather disruptions. 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.
RHB IB noted that if inflation exceeds the official forecast range of 1.5 to 2.5 per cent, with a 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. On the currency front, RHB IB expects the ringgit versus the US dollar to ease towards 4.00 to 4.05 by the end of 2026. The current hawkish US Federal Reserve (Fed) repricing of its policy should fade when energy-led inflation pressure moderates and geopolitical risk premia recede. However, a prolonged spike in oil prices driven by supply disruptions will pose challenges 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.