MALAYSIAN ECONOMY TO STAY RESILIENT IN 2026 ON FDI, ROBUST INFRASTRUCTURE INVESTMENT -- HSBC

KUALA LUMPUR, Jan 19 (Bernama) -- Malaysia's economy is expected to remain resilient this year, driven by the ongoing foreign direct investment (FDI) and robust infrastructure investment, said HSBC chief Asia economist Frederic Neumann. 

He said the nation's gross domestic product (GDP) grew by 4.9 per cent for 2025, close to the bank’s expectation of around 5.0 per cent, underscoring the economy’s underlying strength despite emerging global headwinds.

“We see Malaysian growth this year at 4.5 per cent, down slightly from five-ish per cent last year, but it's still a very resilient outcome for Malaysia and that partly is also driven by the ongoing investment in Malaysia," he said during a virtual media briefing on HSBC Asian Outlook 2026 today.

Neumann noted that continued infrastructure development and steady FDI, particularly in electronics, semiconductors and data centres, are expanding Malaysia’s productive capacity and underpinning medium-term growth prospects.

“Malaysia remains very competitive, not least in the electronics sector and the semiconductor supply chain, where of course it is benefiting from the increased demand for electronics that we've seen partly related to artificial intelligence (AI). 

“So we remain quite bullish on that and that should mean that FDI inflows should hold up for Malaysia as well. So that's a bullish outlook,” he said. 

Given subdued inflation momentum, HSBC has revised down its headline inflation forecast slightly to 1.4 per cent for 2025 but kept the 2026 projection at 1.7 per cent.

Head of equity strategy for Asia-Pacific, Herald van der Linde, is moderately positive on Malaysia's equity market as Malaysia offers a mix of defensive characteristics and moderate upside potential, placing it “in the middle of the basket” among Asian equity markets.

“Interest rates remain relatively high around the world and it is positive for banks, including Malaysian banks. Again, that's moderately positive for the equity market, given the exposure that banks have over there. 

“Geopolitical uncertainty doesn't really disturb the Asian equity markets. One of the most defensive markets we have in Asia is Malaysia. There's always good buying in this market because of local purchases,” he said, adding that the downside risk is limited.

Meanwhile, the ringgit is expected to remain supported this year although the gains may be gradual compared to 2025, said head of Asia FX Research Joey Chew. 

She said the ringgit was the best performing currency last year, driven by the government's policies, including requiring the government-linked companies (GLCs) to continue to bring back their dollar proceeds. 

“For example, foreign exchange (forex) deposits onshore have risen a lot and we can also see that some of this is being converted because there is forex turnover data from Bank Negara Malaysia suggesting this increasing volume of transactions. A lot of this is also not only brought back, but also converted into ringgit," Chew said. 

In addition, she said, the private sector has been supportive, with Malaysia seeing a notable increase in foreign direct investment, especially in data centre developments.

However, Chew also cautioned that the ringgit may face headwinds this year, including in terms of the broad dollar view and the United States-Malaysia trade deal, which require Malaysia to import more from the US and also invest there. 

According to HSBC Global Investment Research, the ringgit is expected to reach 4.10 against the US dollar by end-2026.

On global monetary policy, Neumann said HSBC does not expect the US Federal Reserve (Fed) to cut interest rates. 

“Based on our forecast, we see the US economy actually ticking up a little bit this year, with 2.3 per cent growth for 2026, up from 2.2 per cent over the past year. 

“There's still plenty of tailwinds for the US economy in terms of tax cuts, AI, high equity prices. Even mortgage rates have come down. So for us, it's not clear that the Fed necessarily has major macroeconomic justifications for cutting rates aggressively this year,” he said. 

-- BERNAMA