Govt sees economy growing up to 5.3% this year, but slowing in 2027

Malaysia's government has revised its economic growth projections for 2026, forecasting a 4.5% expansion from the previous estimate of 4%. The economy is now anticipated to grow between 4.8% and 5.3% in 2026, up from the earlier range of 4.0% to 4.5%. However, the growth is expected to slow down to between 4.2% and 5.2% in 2027, according to the government's Economic Outlook 2027 report.

The finance ministry's report highlights domestic demand as the main driver of growth, with private consumption, a strong labor market, and rising incomes playing key roles. Government measures like SARA, STR, and the PJRM (Sumbangan Asas Rahmah, Sumbangan Tunai Rahmah, and Payung Rahmah) are aiding household consumption, while BUDI95 and targeted BUDI Diesel subsidies are intended to protect households from energy price spikes and inflation.

The services sector, bolstered by tourism, retail, and transport, is set to remain the primary growth engine, aided by the Visit Malaysia 2026-2027 initiative. Meanwhile, the manufacturing sector is projected to benefit from technological advancements and the growth of high-value industries, such as semiconductors and electrical and electronics.

Nonetheless, the report warns that the outlook remains contingent on external factors, including geopolitical tensions, changes in international trade policies, and global financial market volatility.