Malaysia's growth forecasts lifted after stronger Q2

KUALA LUMPUR saw Malaysia's economic growth leap ahead in the second quarter (Q2), prompting several research firms to revise their forecasts for the country's 2026 GDP growth. The economy grew six per cent in Q2, outpacing expectations and surpassing both Bloomberg consensus estimates and the government's advance projection of 5.8 per cent. This stronger performance was fueled by heightened service and manufacturing sector growth, a revival in mining output, and robust domestic spending.

Kenanga Research, MBSB Research, and RHB Research all increased their 2026 GDP growth projections, with the latter two maintaining their forecasts above the government's official range and Bank Negara Malaysia's forecast band. Kenanga Research's revised forecast suggests a 5 per cent growth rate for H2, while MBSB Research anticipates a slowdown in growth momentum in the second half due to fading base effects, supply disruptions, and higher cost pressures.

RHB Research expects sustained growth between 5.0 per cent and 5.2 per cent in H2, citing resilient domestic demand and continued strength in E&E exports.

Despite the optimistic outlook, all three firms caution that a prolonged geopolitical tension escalation could negatively impact Malaysia's economic prospects. Under a worst-case scenario, Malaysia's GDP growth could contract to 4.6 per cent, 0.8 percentage points below the current baseline forecast. However, the central bank is expected to maintain the overnight policy rate at 2.75 per cent throughout 2026, as inflation remains manageable and growth has picked up without broad-based demand-side inflation.