Malaysia's growth outlook stays upbeat, domestic strength to cushion global shocks

Malaysia's economic outlook remains cautiously optimistic, according to the country's economic review. The Statistics Department expects resilient domestic demand and investment to support growth, despite geopolitical tensions, energy-market disruptions, and supply-chain shocks clouding the global environment. The Leading Index rose 1.3 percent year-on-year in June, indicating continued momentum in domestic demand and investment activity.

Malaysia's GDP expanded six percent year-on-year in the second quarter, driven by sustained domestic demand and robust exports. On a quarter-on-quarter basis, GDP grew 2.5 percent, rebounding from a slight contraction in the previous quarter. All major sectors, except agriculture, recorded growth, with services being the main engine of expansion.

Manufacturing output increased 7.3 percent, electricity rose 6.7 percent, and mining expanded 3.1 percent. The momentum in industrial activity accelerated in the second quarter, with the Industrial Production Index growing 7.7 percent year-on-year. Manufacturing sales value climbed 9.8 percent year-on-year to RM177 billion in June, led by the electrical and electronics sector.

Services continued to boost domestic activity, with revenue increasing 11.2 percent year-on-year to RM714.7 billion, and the Volume Index of Services rising 5.9 percent. External trade also provided a major boost, with total trade surging 44.7 percent year-on-year to RM340.9 billion in June. Inflation eased to 1.9 percent in June from two percent in May, and unemployment remained at 3 percent.

Despite these positive indicators, developing Asia and the Pacific faces a weaker outlook, with growth projected at 4.9 percent in 2026, down from the previous 5.1 percent forecast.