Overview
Malaysia’s economic momentum appears to have moderated at the start of the year after a pronounced acceleration in the closing months of 2025. A poll of 17 economists conducted between May 6 and 12 put year-on-year growth for the January-March quarter at 5.3%, easing from 6.3% in the previous quarter and aligning with a preliminary estimate released in April. Forecasts in the poll ranged from 5.1% to 5.5%. Official gross domestic product data is due on Friday.
Key drivers
Analysts pointed to resilient household consumption as a central pillar of demand, supported by fuel subsidies that preserve disposable income for many households. In the words of Lavanya Venkateswaran, senior ASEAN economist at OCBC Bank: "As long as fuel subsidies are in place, household cash flow is protected, and that means GDP growth is also protected from the household side. To add to that, the tailwinds from the global semiconductor upcycle are also supporting Malaysia’s economic growth."
Those semiconductor-related gains have been cited as providing lift to manufacturing activity, while services, construction and agriculture also showed expansions in advance estimates for the quarter.
Sector performance
Advance estimates indicated a broadly based expansion across several major sectors. Services, manufacturing, construction and agriculture contributed positively to output in the quarter. By contrast, mining and quarrying registered a contraction of 1.1% year-on-year, driven by lower production, particularly of crude oil and natural gas, which weighed on the sector.
Inflation and external uncertainty
The survey noted that broader uncertainty related to the U.S.-Israel war on Iran pushed up inflation in several Asian economies and had a dampening effect on domestic demand in the region. That external risk was identified as a headwind even as Malaysia’s domestic demand remained supported.
Outlook and policy
Looking to the full year, a separate poll conducted in April showed economists expected Malaysia’s economy to grow 4.5% in 2026, a projection that sits within Bank Negara Malaysia’s forecast range of 4% to 5%. Bank Negara Malaysia has kept its benchmark interest rate unchanged at 2.75% for a fifth consecutive meeting, citing expectations of continued price stability and sustainable economic growth.
OCBC’s Venkateswaran added that while growth is expected to slow in the coming quarters, the full-year average remains at 4.4% and the economy should be relatively resilient: "Economic growth will slow in the coming quarters, the full-year average is still 4.4%, but the economy will remain resilient nonetheless, at least being better able to mitigate risks than some regional peers."
Near-term data watch
Markets and policy observers will be watching the official GDP print due on Friday for confirmation of the advance estimates and to assess the balance of sectoral contributions, particularly given the drag from mining and the support coming from household spending and semiconductor-linked manufacturing.