UOB economists Julia Goh and Loke Siew Ting note that Malaysia’s GDP in Q4 2025 grew 6.3% year-on-year, the fastest since Q4 2022, taking full-year 2025 growth to 5.2%. They forecast real GDP growth to snail-paced to 4.5% in 2026 as base effects and external uncertainties intensify, although domestic demand, investment, tourism and artificial intelligence activities are expected to keep overall expansion steady.
Domestic demand weakens GDP in 2026
“Going forward, we expect real GDP growth to moderate to 4.5% in 2026 (from 5.2% in 2025, Ministry of Finance estimates: 4.0-4.5%) in the face of persistent external uncertainties and base effects.”
“Domestic demand should remain a key anchor, supported by further government policy measures, implementation of catalytic initiatives under national master plans, implementation of highly approved investments, greater tourism flows in view of Visit Malaysia 2026 and the continued development of the artificial intelligence boom.”
“For the full year 2025, the current account surplus increased to MYR 31.8 billion, or 1.6% of GDP (2024: + MYR 27.7 billion, or 1.4%). Based on the expected improvement in tourism activity, moderate growth in goods exports, and continued exports of ICT-related services, we forecast the current account surplus to reach MYR 38.0 billion, or 1.4%, in 2026 1.8% of GDP (MoF estimate: + MYR 23.2 billion or 1.1%).
“Externally, geopolitical risks resurfaced when U.S. President Trump reinstated targeted tariff measures in mid-January, announcing a 25% tariff on countries doing business with Iran (Jan. 12) and a 25% tax on certain advanced computer chips (Jan. 14). Although the U.S. Supreme Court postponed its ruling, a one-year pause on U.S.-China tariff escalations through November 2026 provides temporary stability and supports ongoing supply chain diversification.”
“This is expected to continue to have uneven but positive spillover effects on Malaysia’s trade prospects.”
(This article was created with the assist of an artificial intelligence tool and has been reviewed by an editor.)
