MALAYSIA’S GDP GROWTH TO STAY ABOVE 4 PCT THROUGH 2026 -- MARC RATINGS

KUALA LUMPUR, Oct 15 (Bernama) -- Malaysia’s economy is expected to sustain growth of above four per cent in 2025 and 2026, driven by resilient domestic demand, major infrastructure projects and ongoing structural reforms, Malaysian Ratings Bhd said.

MARC Ratings chief economist Dr Ray Choy said the agency forecasts gross domestic product (GDP) growth at 4.2 per cent in 2025 and 4.0 per cent in 2026, reflecting steady expansion despite global headwinds.

“In 2025, our in-house forecast would be 4.2  per cent GDP growth, and we are expecting a very slight alteration to about 4.0 per cent for 2026,” he said during his presentation at MARC360 Reflections: Analyses of Malaysia’s Budget 2026 and Post-Budget Debates webinar today.

Choy said Malaysia’s diversified economic structure, spanning services, manufacturing, and electrical and electronics industries, would continue to underpin resilience, while fiscal consolidation and governance reforms are strengthening macroeconomic fundamentals.

“Malaysia’s robust economic growth will continue to be supported by key developments and policy initiatives, including the Johor–Singapore Special Economic Zone, the Rapid Transit System Link, Penang Light Rail Transit, the Pan Borneo Highway, and the East Coast Rail Link,” he added.

On Budget 2026, Choy described it as innovative, noting that it explicitly co-opts government-linked companies (GLCs) and government-linked investment companies (GLICs) into national development efforts. 

“It was very innovative with regards to co-opting the GLCs and GLICs to make it clear that the importance of public–private partnerships is major in driving overall development.

“That will reduce some of the disconnect in goals and ensure spending is channelled into projects with positive return on investment (ROI) and good project economics,” he added.

He said that while Malaysia continues to maintain a framework of deficit control, the country still has sufficient fiscal and monetary levers to navigate uncertainty, including potential monetary easing, should global conditions deteriorate.

“Malaysia’s Consumer Price Index (CPI) is trending low. The subsidy retargeting did not result in conventionally expected CPI outcomes. Because of the very low CPI, that actually gives the potential for monetary easing to be possible,” he said.

Choy also highlighted the importance of strengthening external resilience as global trade and geopolitics become increasingly fragmented, adding that Malaysia’s ASEAN chairmanship in 2025 presents a valuable opportunity to position the country as a regional driver of economic cooperation.

“Because of emerging geo-economic fault lines and geopolitical fractures globally, the whole idea of strengthening our external resilience will be very important for the next decade, as well as how we leverage our role as ASEAN Chair,” he said.

Talking on Malaysia’s debt sustainability, Choy said it remains strong, supported by healthy GDP growth and fiscal reforms under the Fiscal Responsibility Act and Government Procurement Act.

“Malaysia’s growth continues to outpace its debt-servicing cost, and reforms to expand revenue and control expenditure are steering the country towards a more sustainable fiscal path,” he said.

Meanwhile, OCBC Bank senior ASEAN economist Lavanya Vekataswaran said Budget 2026 hits all the right notes by balancing fiscal prudence with flexibility to respond to global uncertainties.

“It allows the government some room to also be a bit nimble in terms of allocations as we go along because it has provided for tax revenue growth and less reliance on non-tax revenues.

“So, overall, it hits all the right notes, but we will have to navigate uncertainty going forward,” she added.

-- BERNAMA