Malaysia's economy maintained solid growth in the second quarter of 2026, driven by robust manufacturing activity and rising exports, particularly in the electrical and electronic (E&E) sector amid heightened demand linked to artificial intelligence (AI) and geopolitical stockpiling. Official data showed the country’s gross domestic product (GDP) grew by 6% in 2Q26, surpassing earlier estimates from both the government and market analysts, which had projected growth of around 5.8%.
Despite the stronger-than-expected performance, a cautious outlook prevails among policymakers and economists. Bank Negara Malaysia (BNM) governor Datuk Seri Abdul Rasheed Ghaffour reaffirmed the central bank’s forecast of 4% to 5% growth for the full year, signaling expectations for a slowdown in the latter half of 2026.
Economic research firms presented a mixed but generally tempered view of Malaysia’s growth trajectory. Kenanga Research, MBSB Research, and BIMB Research all raised their GDP forecasts for 2026, while CIMB Research chose to maintain its previous projection. Most analysts agreed that the economy had peaked in the first half of the year, with growth likely to moderate due to high year-on-year base effects and external uncertainties, including ongoing geopolitical tensions in the Middle East.
CIMB Research highlighted that the acceleration observed in the second quarter was largely confined to net exports and a rebound in mining activities, partially driven by base effects from the previous year. The research firm noted a slight easing in domestic demand growth to 5.1% from 5.2% in the first quarter and pointed to continuing risks from weakened domestic sentiment. CIMB expects Malaysia’s benchmark overnight policy rate (OPR) to stay at 2.75% through the first half of 2027 unless inflationary pressures increase significantly or growth broadens beyond export manufacturing.
MBSB Research revised its GDP forecast upward to 5.1% from an earlier 4.5%, factoring in stronger domestic demand supported by rising tourism and higher household incomes. However, the firm cautioned that growth momentum is expected to decelerate later in the year amid persistent supply chain disruptions, cost pressures, and external risks such as escalating geopolitical conflicts and tighter trade regulations.
Kenanga Research also raised its growth projection to 5.3%, citing firm private consumption, steady employment, wage increases, and government assistance as key drivers. The firm expects the current interest rate environment to remain supportive of growth, with inflation risks viewed as predominantly supply-driven. It emphasized Malaysia’s diversified export base and strong performance in E&E subsectors bolstered by global digitalisation and AI trends as factors cushioning the economy against external shocks.
BIMB Research, which upgraded its 2026 GDP forecast to 5.5% from 4.9%, identified Malaysia's integration into semiconductor and electronics supply chains as a competitive advantage amid the global technology cycle. The firm anticipates tourism to continue contributing to growth, although to a lesser degree due to higher jet fuel costs. It also noted potential softness in construction activity linked to fiscal recalibration but expects strong private sector investment in data centres and industrial infrastructure to sustain economic momentum.
Overall, analysts agree that Malaysia's economy remains resilient in the face of external challenges, with a combination of sound domestic demand, export strength, and investment activity underpinning the outlook for 2026, albeit with expected moderation in growth during the second half of the year.