KUALA LUMPUR: Global developments will continue to influence Malaysia’s outlook, increasingly through pricing dynamics rather than the overall direction of global growth, creating a more manageable external environment.
Public Investment Bank Bhd (PublicInvest) noted that factors such as tariffs and US Federal Reserve easing are no longer uniformly negative or supportive, with their impact shaped by growth and inflation trends, market positioning and sensitivity to long-term bond yields.
For Malaysia, the firm expects external risks to be targeted and episodic rather than systemic.
Key exposures lie in sector-specific actions, particularly in semiconductors, as well as enforcement-related frictions that could affect shipment timing and order visibility.
It said the more relevant external signal for Malaysia is the composition of global demand, noting that a technology-led trade impulse could continue to support electrical and electronics exports even if broader goods trade softens.
Conversely, a downshift in artificial intelligence-related capital expenditure would have outsized spillovers on export momentum, capacity utilisation and investment visibility.
On the currency front, PublicInvest said a firmer ringgit trajectory is more likely to be achieved through consistent macroeconomic delivery, investment-related inflows and resilience in external balances, rather than reliance on a prolonged US dollar down-cycle.
“This reinforces our view that domestic execution and reform credibility will be the key differentiators for Malaysia in the first half of 2026,” the firm said.
Kenanga Investment Bank Bhd (Kenanga IB) expects external pressures to pick up in 2026 as US tariff effects filter through and China‘s recovery remains gradual; Malaysia’s export performance is still seen as resilient.
Export growth is projected to moderate to 5.1 per cent in 2026 from an estimated 6 per cent in 2025, reflecting softer commodity prices, supply adjustments and a firmer ringgit, rather than a broad-based slowdown.
Overall, both PublicInvest and Kenanga IB expect Malaysia’s economy to remain on a steady footing in 2026, supported by resilient domestic demand, stable labour market conditions and continued expansion in the services sector, even as growth normalises amid a more challenging global environment.
PublicInvest projects Malaysia’s gross domestic product (GDP) to expand by 4.6 per cent year on year in 2026, slightly lower than an estimated 4.7 per cent in 2025. This forecast sits at the upper end and marginally above the Finance Ministry’s official growth range of 4.0 per cent to 4.5 per cent, with domestic demand remaining the primary growth driver.
Separately, Kenanga IB expects GDP growth to moderate to 4.2 per cent in 2026 from an estimated 4.8 per cent in 2025, citing similar support from domestic consumption and continued services sector expansion.
PublicInvest said private consumption is expected to remain resilient, supported by steady labour market conditions, targeted fiscal measures and a gradual improvement in services activity.
It noted that investment delivery would be a key swing factor in the first half of 2026, as markets increasingly differentiate between announced projects and actual implementation.
“The key transition is shifting from approvals to mobilisation, procurement cadence and on-the-ground execution,” the firm said, adding that upside risks are more likely to materialise through credible policy delivery and visible investment realisation.
Kenanga IB echoed the view that domestic demand would continue to underpin growth, supported by strong tourism inflows, stable employment conditions and moderate gains in trade activity.
It expects distributive trade sales to grow by 6.1 per cent in 2026, compared with an estimated 5.7 per cent in 2025 and 5.5 per cent in 2024.
Sales momentum has remained firm, averaging 5.3 per cent year on year in the first ten months of 2025, supported by festive spending, rising tourist arrivals and the Sumbangan Asas Rahmah (SARA) RM100 one-off cash transfer.
On the labour front, Kenanga IB maintained its unemployment rate forecast at 3 per cent for 2026, in line with conditions observed in 2025, supported by higher minimum wages, continued job creation in the services sector and the implementation of approved investments.
Inflation is expected to remain contained in 2026, it said.
PublicInvest forecasts headline consumer price index growth at 1.9 per cent, reflecting mild normalisation and manageable second-round effects in the absence of abrupt administered price adjustments.
With growth steady and inflation anchored, the firm maintained its view that Bank Negara Malaysia will keep the overnight policy rate unchanged at 2.75 per cent through 2026, citing the need to preserve policy flexibility amid an external environment prone to repricing episodes.
© New Straits Times Press (M) Bhd
