IMF forecasts 5.2% GDP growth for Malaysia in 2026

The International Monetary Fund (IMF) projects Malaysia's Gross Domestic Product (GDP) to expand by 5.2% in 2026 and 4.7% in 2027, despite regional economic unpredictability, according to its October 2026 Asia and Pacific Regional Economic Outlook titled "Resilient Amid Uncertainty: Can It Be Sustained?". The IMF attributes Malaysia's growth to technology-related exports and significant investment in data centers.

Currently, Malaysia boasts operational data center capacity exceeding 1,000 megawatts (MW), with an additional 1,500 MW under construction. The report further indicates that modern services constitute approximately 30% of Malaysia's services exports in 2023, while traditional services account for the remainder. Across the Association of Southeast Asian Nations (ASEAN), services exports embedded in goods exports represent 17%, while services exports facilitated through a commercial presence account for 30%.

However, the IMF underscores that many services exports in the region predominantly target global markets rather than regional markets, with only 14% of modern services being exported to countries within the Asia-Pacific region on average. In terms of inflation, the IMF notes that the transmission of higher energy prices to both headline and core inflation has remained relatively subdued in most advanced and emerging market economies.

This reduction in inflationary pressure can be attributed, in part, to the reliance on inventories and the adoption of price-smoothing measures, such as Malaysia, Korea, and Thailand. Containing the pass-through of higher energy prices has been the primary policy objective, with over 80% of economies implementing measures to mitigate the impact on domestic prices, employing an average of two to four instruments, including fuel price freezes and subsidies.

Malaysia, along with other economies in the region, has also implemented targeted support measures, such as credit guarantees or liquidity facilities to alleviate the burden on exposed sectors and households. Additionally, Malaysia and several other countries have adopted demand-side measures, such as work-from-home arrangements, reduced public sector hours, travel restrictions, and policies aimed at strengthening consumption resilience, particularly among vulnerable and highly indebted households.