KUALA LUMPUR, Oct 16 — Malaysia is on track to exceed its official full-year gross domestic product (GDP) growth forecast of 4.8 to 5.3 per cent after the economy expanded by 5.5 per cent in the first nine months of 2026, economists said.

The Finance Ministry, in its Economic Outlook 2027 report, raised its 2026 real GDP growth projection to 4.8 to 5.3 per cent, up from 4.0 to 4.5 per cent in Budget 2026.

Prof Dr Yeah Kim Leng, director of the economic studies programme at Sunway University’s Jeffrey Cheah Institute, said third-quarter (Q3) GDP growth of 5.3 per cent affirmed the economy’s resilience despite continuing geopolitical uncertainty and persistent global oil shocks.

“With growth hitting 5.5 per cent in the first three quarters, the economy is on track to exceed the full-year official 4.8-5.3 per cent GDP growth expectation,” he told Bernama.

Yeah said growth moderated slightly from the previous quarter but held up well against a challenging external backdrop marked by geopolitical uncertainty and persistent global oil shocks.

“Encouragingly, the manufacturing sector picked up pace, indicating sustained export demand not only for high-value electronics and optical products but also resource-based chemicals, plastics and rubber products that have higher domestic value added,” he added.

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the latest GDP performance was a positive surprise, with growth potentially exceeding the prevailing forecast of 4.8 to 5.3 per cent.

“At 5.3 per cent, the Malaysian economy is seen to be growing above its trend level of around 4.7 per cent,” he said.

Mohd Afzanizam said foreign investors’ positive appetite for Malaysian investments, coupled with stronger demand for technology-related sectors, had helped sustain economic growth.

Full employment also helped support steady consumer spending as inflation remained fairly contained, he added.

Earlier today, the Department of Statistics Malaysia (DOSM) said in its advance estimates report that the economy expanded by 5.3 per cent in Q3 2026, following growth of 6.0 per cent in the preceding quarter.

For the first three quarters of 2026, the economy grew by 5.5 per cent, higher than the 4.8 per cent recorded in the corresponding period of 2025.

Domestic demand and E&E to sustain growth

RHB Investment Bank Bhd (RHB IB) is maintaining its 2026 GDP growth forecast at 5.4 per cent, with its autoregression and leading economic index models pointing to sustained growth of 5.0 to 5.2 per cent in the second half of the year.

“Robust growth of 5.7 per cent in 1H 2026, together with today’s 5.3 per cent growth reading, which was in line with our in-house expectation, reinforces our constructive outlook.

“Looking ahead, economic activity is expected to remain supported by resilient domestic demand and sustained strength in electrical and electronics (E&E) exports,” it said in a research note today.

RHB IB said private consumption was expected to remain firm, supported by healthy labour market conditions, continued income growth and civil servant salary adjustments.

“Private investment should also remain resilient, driven by infrastructure projects, ongoing data centre developments and capacity expansion in manufacturing.

“Meanwhile, continued digitalisation, automation and favourable global demand should encourage further investment, particularly in manufacturing and information and communication technology,” it said.

In a separate note, Kenanga Investment Bank Bhd also maintained its full-year growth forecast at 5.3 per cent, although the stronger-than-expected advance estimate pointed to an upside risk to its projection.

It said any revision would depend on September’s data and the full GDP release.

“Domestic demand should increasingly drive growth in the 2H 2026, backed by resilient consumer spending, strong services activity and continued investment in artificial intelligence (AI) and digital infrastructure.

“Implementation of approved projects, rising household incomes, and a firm labour market add further support,” it said.

Kenanga said manufacturing should remain a key growth driver, supported by sustained E&E demand linked to AI and data centre expansion, although growth could slow as the effects of front-loading fade.

External risks remain, OPR hold expected

Mohd Afzanizam said the Malaysian economy remained fairly resilient despite external shocks, particularly the ongoing war in Iran, which could affect global supply chains and fuel costs.

He said proactive government measures, such as targeted fuel subsidies through MyKad introduced last year, along with Petroliam Nasional Bhd’s efficiencies in procuring fuel supplies beyond the Strait of Hormuz, had allowed the economy to operate almost seamlessly.

RHB IB, however, said geopolitical tensions in West Asia, commodity price volatility and shifting trade policies posed risks to the outlook.

“Prolonged tensions and elevated oil prices could raise production and transportation costs while dampening global demand,” it said.

Separately, CIMB Treasury and Markets Research said the stronger third-quarter results pointed to a modest overshoot of its 5.0 per cent growth forecast for 2026, which would be revised after the full Q3 GDP release in November.

“Stronger external demand remains supportive of the manufacturing outlook, particularly in E&E, where manufacturers have reported longer order books,” it said.

Despite the stronger GDP growth, CIMB maintained its expectation that Bank Negara Malaysia would keep the Overnight Policy Rate (OPR) at 2.75 per cent in November, citing signs of moderating domestic activity and contained inflation.

RHB IB also expects the OPR to remain unchanged at 2.75 per cent at the November Monetary Policy Committee meeting, saying the current economic environment and inflation trajectory support a broadly stable policy outlook.

DOSM said the preliminary GDP report, which provides a detailed and comprehensive analysis of economic performance in Q3 2026, would be released on November 18, 2026. — Bernama

 Malay Mail – Money