Malaysia’s economy expanded 5.3% year on year in the first quarter of 2026, according to advance estimates released on Friday (17th April). The growth marks a slowdown from the 6.3% recorded in the final quarter of 2025, which had been the fastest pace in three years.
The statistics department said the latest growth was supported by continued expansion in the manufacturing, services and construction sectors, although overall momentum eased. The mining and quarrying sector declined by 1.1% due to lower production of crude oil and natural gas.
“Malaysia’s first quarter of 2026 reflects an economy that remains fundamentally resilient, even with the rising global uncertainties, particularly elevated oil prices following geopolitical tensions,” said chief statistician Mohd Uzir Mahidin.
Final GDP figures for the quarter are scheduled for release on 15th May.
Last month, the central bank raised its 2026 growth forecast to a range of 4%–5%, up from an earlier estimate of 4%–4.5%. The revision was supported by expectations of stronger household spending, steady exports and tourism.
Malaysia’s economy grew 5.2% in 2025, exceeding expectations on the back of record trade and approved investments.
However, Bank Negara Malaysia warned that prolonged conflict in the Middle East could disrupt supply chains and push up fuel prices, posing risks to both growth and inflation.
On 9th April, the World Bank increased its 2026 growth forecast for Malaysia to 4.4% from 4.1%.
Malaysian Investment Development Authority chairman Tengku Zafrul said the improved outlook should not lead to complacency.
“When global oil prices rise, the impact reaches the cost of goods here. When global trade is tense, our opportunities can also be affected. That is why our focus is not just on growth but also on building a more resilient and diversified economy,” he said in an Instagram post.
Separate data showed consumer prices rose 1.7% in March from a year earlier, up from 1.4% in February and in line with analysts’ expectations.
On a quarter on quarter, seasonally adjusted basis, GDP contracted 4.4%, reversing the 3.3% expansion in the previous quarter.
The services sector, which remains the main driver of the economy, expanded 5.4%, slowing from 6.3%. Growth was supported by wholesale and retail trade, as well as the information and communication, and transportation and storage subsectors.
Manufacturing grew 5.8% compared with 6.1% previously, driven by electrical and electronics, along with gains in food processing, oils and fats, and metal-related industries.
Construction growth slowed to 7.8% from 11.0%, ending eight consecutive quarters of double-digit expansion, although activity remained supported by specialised construction works and non-residential projects.
The agriculture sector expanded 2.8%, down from 5.4%, as declines in rubber and fishing output were partly offset by stronger oil palm and livestock production.
In contrast, the mining and quarrying sector contracted 1.1%, reversing a 2.0% expansion in the previous quarter due to weaker output of crude oil, condensate and natural gas.
Kenanga Investment Bank said the growth figure exceeded its forecast of 4.7% but came in slightly below the Bloomberg consensus of 5.5%.
The bank said domestic demand continues to underpin growth, supported by rising household incomes, low unemployment and ongoing investment activity, particularly in sectors linked to artificial intelligence and data centres.
It added that manufacturing is expected to remain resilient, driven by global demand for electrical and electronics products tied to these sectors, while monetary policy is likely to remain supportive, with Bank Negara Malaysia expected to keep the Overnight Policy Rate at 2.75% throughout 2026.
Kenanga maintained its full-year GDP growth forecast at 4.5%, with potential upside to 5.0% if geopolitical conditions stabilise and economic momentum strengthens.
However, it cautioned that external risks remain elevated, particularly from ongoing tensions in the Middle East, which could disrupt global supply chains and increase energy price volatility. Higher energy costs may also weigh on purchasing power and business margins.
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