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FRIDAY | JAN 23, 2026

M’sian economy to grow 4.5% in 2026: AmBank Research

Ű BY HAYATUN RAZAK sunbiz@thesundaily.com

KUALA LUMPUR: Malaysia’s economy is expected to grow at 4.5% in 2026, supported by domestic demand, investment and tourism activities under the Visit Malaysia 2026 campaign, according to AmBank Research. The research house raised its full-year 2025 growth forecast to 4.9% from 4.6% earlier, citing stronger-than-expected second-half momentum, the ongoing artificial intelli gence-driven semiconductor upcycle and improving clarity on global trade conditions. AmBank Group chief economist Firdaos Rosli said private consumption and invest ment would remain key drivers of growth in 2026, with potential upside risks from government cash assistance and tourism incentives. “Private consumption will remain good at around 4.9%, possibly higher if Sara cash assistance is disbursed early and fully spent in the first quarter, and with tourism receipts expected to be strong,” he disclosed at AmBank’s media briefing on Malaysia’s Macroeconomic Outlook 2026 yesterday. “Domestic tourism should also benefit from the additional RM1,000 tax relief for domestic travel, so we see consumption remaining healthy with potential upside risks,” he added. Firdaos said continued fiscal support had helped sustain household spending and ensure the benefits of growth were broadly shared across the economy. “The govern ment’s ability to continue using cash transfers as a key policy lever to keep private consumption at a healthy level, while ensuring that households feel the fruits of a growing economy, is a positive development.” Firdaos said that in many advanced economies, including the United States, the debate now is about the size of the K-shaped recovery, where growth benefits only certain segments of society. “We are not seeing that dynamic in Malaysia,” he pointed out. Firdaos said private investment, forecast to grow 5.9% in 2026, remained at a healthy level despite moderating from a higher base in 2025, supported by the ongoing AI and capital expenditure cycle. “Although investment growth is coming down from a higher base, it should remain solid in 2026, largely driven by the AI-related capex cycle we are experiencing now.” He added that stronger imports of capital goods would support export growth in the coming year and imports are growing slightly faster than exports, which they see as a conduit for exports to expand at a healthier pace in 2026 compared with 2025. On the supply side, Firdaos said, growth would remain broad-based, led by the services sector, which accounts for about 60% of gross domestic product and is forecast to expand 5%. “We are now seeing all major sectors trending in positive territory, some thing we have not seen for more than a year. succeeded in slowing the growth of debt service charges (DSC) in 2025 to 6.4%, compared with 12.3% in 2023 and 9% in 2024, as a result of the implementation of fiscal reform measures and prudent debt management. Deputy Finance Minister Liew Chin Tong said the government has reduced new borrowings to RM92 billion in 2023, further down to RM77 billion in 2024, and projected at around RM75 billion in 2025, from RM100 billion in 2021 and 2022, with efforts to

at 2.75% throughout 2026,” he added. (Yesterday, BNM’s Monetary Policy Com mittee maintained the OPR at 2.75%.) Firdaos said the unemployment rate declined even further to 2.9% in November 2025, the lowest level since November 2014, signaling the labour market continued to strengthen, supported by stable economic conditions. “We foresee the labour market to remain healthy in 2026, with hiring activity steady and the unemployment rate staying around 3% despite potential spillovers from a more challenging external trade environment,” he highlighted. Additionally, he pointed out that employ ment growth has outpaced labour expansion since August 2021, indicating a strong job market and robust economic growth, which explains the latest unemployment rate outlook, as more people are being hired. “We also note that around half a million Malaysians in the job market are currently unemployed. This is cause for alarm, as the labour force participation rate is at an all- time high, while the majority of the unemployed are actively seeking jobs,” he remarked. Firdaos said job creation is likely to remain broad-based, particularly in services and manufacturing, with support from electronics or technology-driven industries. “Wage growth for both services (Q3’25: 4.7% versus Q2’25: 4.2%) and manufacturing (Q3’25: 2.0% versus Q2’25: 1.8%) also continued its upward momentum, signalling a favourable labour market dynamic that can sustain job creation in these sectors,” he added. At the same time, government initiatives under Visit Malaysia 2026 are expected to further support employment opportunities in tourism-related sectors. Firdaos emphasised that Malaysia’s headline inflation is expected to remain subdued at 1.8% in 2026, picking up from an estimated 1.4% in 2025. “The uptick primarily reflects a low base effect and the anticipated lagged cost pass through from water tariff adjustments and the expansion of Sales and Service Tax .” However, he said, upward pressure will be partially offset by softer global commodity prices particularly oil and coal which should translate into lower fuel and electricity prices, together accounting for about 8.2% of the Consumer Price Index basket. “Moreover, a stronger ringgit should reduce import costs, further containing inflationary pressures,” Firdaos concluded. exposure remains under control based on current financial and economic capacity. In addition, the government prioritises user payment-oriented projects through the Public Private Partnership Master Plan 2030 and reviews the implementation methods of off budget projects,” he said. He highlighted that responsible fiscal management, supported by pragmatic eco nomic management, will be able to drive the development of economic activities, private investments, and encourage sustainable economic growth. – Bernama

o Private consumption and investment to remain key drivers, supported by cash aid and tourism activities, says chief economist

Firdaos speaking during AmBank’s media briefing on Malaysia’s macroeconomic outlook for 2026 in Kuala Lumpur yesterday. – BERNAMAPIC

sharper slowdown in major trading partners such as China and the risk of a correction following the recent AI capex supercycle,” Firdaos said. Meanwhile, AmBank Research expects Bank Negara Malaysia (BNM) to keep the Overnight Policy Rate (OPR) unchanged at 2.75% throughout 2026 on the back of a tight labour market and subdued inflation. Firdaos said the OPR outlook is expected to remain stable following the pre-emptive 25 basis point cut last year. “Following the pre-emptive 25bps cut in 2025, we expect the OPR to remain unchanged implementation of e-invoicing. Other measures include optimising public expendi-ture, among others, through the imple-mentation of targeted diesel and RON95 subsidies as well as the rationalisation of statutory bodies,” he added. Liew said government borrowing is used solely to finance projects and programmes under development expenditure that provide long-term returns to the country and its people. “The government has also set a limit on exposure to financial guarantees at 25% of gross domestic product to ensure government

This points to broad-based growth for Malaysia.” Firdaos also said the bulk of structural reforms under the current political cycle had largely been implemented, with their impact expected to materialise more fully over the next two years. “The policy heavy lifting has largely been done. The impact of these reforms should come through more clearly in 2026 and 2027, providing an additional tailwind for growth going forward.” The outlook remained subject to balanced upside and downside risks, particularly from global trade tensions, the economist said. “Downside risks stem mainly from a continue reducing it in 2026. He said this in response to a question in Parliament yesterday regarding the govern ment’s strategy to address debt service payments, which are expected to account for 16.3% of total government revenue in 2025. Liew said the government is continuously implementing several fiscal strategies, inclu ding pursuing gradual fiscal consolidation. “In addition, the government is expanding the revenue base and ensuring sustainable revenue collection, among others, through the expansion of the Sales and Service Tax and the

Growth of national debt service charges lowered to 6.4% in 2025: Liew KUALA LUMPUR: The government has