Economy Remains Resilient, BNM Assessing Potential Risk From Middle East War - Governor

By Karina Imran

KUALA LUMPUR, March 6 (Bernama) -- Malaysia’s economy remains resilient despite rising global uncertainty arising from the escalating conflict in the Middle East, and Bank Negara Malaysia (BNM) is closely monitoring developments as the situation continues to evolve.

BNM Governor Datuk Seri Abdul Rasheed Ghaffour told Bernama the Middle East conflict has heightened global economic uncertainty, adding that its duration and severity will determine the extent of the impact.

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"The situation is fluid and fast-moving. There could be various scenarios. But what is certain is that Malaysia is facing these challenges from a position of strength. 

“Being a small, open economy, Malaysia is exposed to such global risks,” he said when asked about the impact of the conflict on the Malaysian economy.

Abdul Rasheed said that the central bank is closely monitoring global developments, including oil prices, potential supply disruptions, and financial market volatility. The central bank expects to disclose its assessments later this month.

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Crude oil prices have jumped by more than US$10 within five days since the war started last Saturday, hovering above the US$80 per barrel level.

“We have also started seeing increased volatility in global financial markets, with many currencies affected, even the ringgit," he said.

The ringgit closed at 3.9415/9480 on Thursday.

Nonetheless, the governor affirmed that despite the heightened geopolitical tensions, Malaysia’s robust domestic growth, moderate inflation, sound financial system and resilient external sector will continue to support economic growth. 

"Sometimes the market reacts to changing sentiments very quickly. So, there may be a short-term reaction. But what is more important are our long-term fundamentals, which the markets will see.

"So it's important for us to press on with reform measures and make sure that the economy keeps on growing," he said.

Abdul Rasheed noted that Malaysia’s economy expanded 5.2 per cent in 2025, driven by strong domestic demand, higher electrical and electronics (E&E) exports and robust tourism activity.

These growth drivers will continue into 2026, he said, underpinned by strong domestic demand, which will be the main anchor of economic expansion. 

Additionally, employment, wage growth and policy measures will remain supportive of the household spending. 

At the same time, investment activity is expected to remain firm, driven by multi-year projects, as well as new small-scale projects that could generate multiplier effects on the economy.

He said Malaysia will continue benefiting from the E&E sector, given the steady data centre development, technology and artificial intelligence growth. 

Beyond that, robust tourism activity from Visit Malaysia 2026 is also expected to support Malaysia’s local businesses.

Meanwhile, Abdul Rasheed believes that the overall headline inflation will remain moderate for this year. 

In 2025, Malaysia’s headline inflation stood at 1.4 per cent, with core inflation at 2.0 per cent, while January 2026 data showed headline inflation at 1.6 per cent and core inflation at 2.3 per cent. 

Against such a backdrop, BNM’s Monetary Policy Committee (MPC) decided to maintain the Overnight Policy Rate (OPR) at 2.75 per cent, which Abdul Rasheed said remains appropriate and supportive of the Malaysian economy.

“We will continue to monitor developments surrounding both global and domestic growth. From a global inflation perspective, there could be potential impacts from higher oil prices and possible supply chain disruptions.

“However, the stronger ringgit has helped to partially mitigate the impact. More importantly, targeted subsidies remain in place to help keep inflation contained,” he added.

-- BERNAMA