Higher-than-expected growth on the cards for Malaysia [WATCH]

KUALA LUMPUR: Malaysia anticipates a GDP growth rate exceeding 5.0% this year, surpassing the 4.0 to 5.0% range forecasted by Bank Negara Malaysia. This positive outlook stems from impressive second-quarter GDP figures and the country's ability to withstand external shocks, along with high demand for products ranging from electrical and electronics to liquefied natural gas.

Bank Muamalat Malaysia Bhd's chief economist, Dr Mohd Afzanizam Abdul Rashid, raised his 2026 growth forecast to 5.2% from 4.8%, citing the strong Q2 expansion of 6.0% compared to the initial 5.8% estimate. While external demand, particularly in tech and commodity sectors, contributed to the growth, domestic factors such as moderating private investment and modest private consumption also played a role.

Dr Afzanizam expects the central bank to keep the overnight policy rate at 2.75%, supporting growth while inflation remains under control. Other economists, such as Zafri Zulkeffeli from Bank Islam Malaysia Bhd, upgraded their 2026 GDP growth forecast to 5.5% from 4.9%, believing that agricultural output and export volumes could further boost growth.

However, the uneven recovery in the economy, with capital-intensive and tech sectors outperforming consumer-facing industries, remains a concern. Overall, the stronger-than-expected Q2 performance has improved Malaysia's growth prospects and strengthened the case for a full-year expansion above 5%.