DBS Group Research expects Malaysia’s gross domestic product (GDP) for Q1 2026 to grow 5.5% year-on-year, slightly below 6.3% in Q4 2025 but still solid. Growth is supported by export-oriented production of electrical and electronic equipment, global development of artificial intelligence, construction and domestic demand. Headline inflation is forecast to rise modestly to 1.7% in March, with pressure from oil eased by fiscal subsidies.
AI tailwind and subtle price pressure
“Incoming data from Malaysia are likely to reflect stable economic growth and subdued inflation in the first quarter of 2026, despite the ongoing shock in the Middle East since February 27.”
“We expect a solid preliminary estimate of GDP growth of 5.5% y/y in Q1 2026, although lower than 6.3% y/y in Q4 2025.”
“Growth was likely supported by continued strength in export-oriented electrical and electronic equipment manufacturing, boosted by global headwinds in AI development, as well as supportive domestic demand driven by ongoing construction and investment momentum, while services expanded significantly in the face of these spillovers, with household spending continuing.”
“We expect headline inflation to pick up but remain subdued at 1.7% year-on-year in March compared with 1.4% year-on-year in February.”
“This reflects some upward pressure from food prices driven by holiday spending and energy prices following the surge in global oil prices resulting from the Iran war, although the overall impact is mitigated by fiscal subsidies.”
(This article was created with the lend a hand of an artificial intelligence tool and has been reviewed by an editor.)
