09/02/2026

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MONDAY | FEB 9, 2026

Malaysia’s growth in 2026 to moderate to 4.6%: Amro

PETALING JAYA: Research houses are upbeat on Malaysia’s renewable energy (RE) sector, citing sustained project awards from Tenaga Nasional Bhd (TNB), electricity demand from data centres and policy catalysts that are strengthening earnings visibility for developers and engineering, procurement, construction and commissioning (EPCC) players. Rakuten Trade vice-president of research Thong Pak Leng said project flow from TNB is the backbone of earnings visibility for renewable energy and EPCC players. “TNB’s rollout will remain the key driver for these companies, and as long as they continue winning contracts, cash flow should remain stable,” he told SunBiz . Thong said Malaysia’s government has set an ambitious target of achieving 70% renewable energy capacity by 2050, up from the current 25%. “To support this, TNB continues to award more EPCC contracts, and KUALA LUMPUR: Malaysia’s eco nomic growth is expected to moderate to 4.6% in 2026 from an estimated 4.9% in 2025, even as the ringgit emerged as the strongest-performing regional currency last year, according to the Asean+3 Macroeconomic Research Office (Amro). The economic surveillance unit said Malaysia remains one of the better-performing economies in the region, supported by resilient domestic demand and continued strength in the global technology upcycle, particularly in electrical and electronics (E&E) exports and artificial intelligence-related (AI related) investments. Lead economist and mission chief for Malaysia Kian Heng Peh said the economy has delivered a solid performance despite rising global trade protectionism and geopolitical tensions. “Growth is expected to remain firm in 2026, with a moderating slant to 4.6% from the estimated 4.9% in 2025 amid persistent external headwinds,” he said during a press briefing following Amro’s annual consultation visit to Malaysia. Domestic demand, especially private consumption, has been a key pillar of support. A stable political environment and clearer policy direction have also helped sustain in vestor confidence, alongside ongoing fiscal reforms. Inflation is projected to average 2% in 2026, reflecting contained cost pressures and limited pass-through from subsidy rationalisation and the expansion of the Sales and Service Tax (SST). After a pre-emptive 25 basis point rate cut in July 2025, Bank Negara Malaysia maintained its policy rate for the rest of the year. Amro said the benign inflation outlook supports the current monetary stance. The external sector remains firm. Ű BY DEEPALAKSHMI MANICKAM sunbiz@thesundaily.com

o Asean+3 Macroeconomic Research Office says country remains one of the better performing economies in the region but cautions that risks remain tilted to the downside

recent corporate news shows many such projects are being secured by companies.” Thong suggested that the continuous flow of renewable energy projects and EPCC contract awards coming from TNB is a sustained pipeline. “This is an ongoing trend.” He also pointed to the acce lerating impact of data centre investments on Malaysia’s power demand, estimating that electricity requirements from the segment could reach 12.9GW by 2030. Because of this, Thong said, Malaysia will need to upgrade its electricity grid and build more renewable energy capacity to ensure there is enough power to meet this demand reliably. To support this rising demand, he added, TNB’s capital expenditure for the power grid is estimated at RM3 billion to RM3.5 billion in 2026, which is expected to underpin a steady pipeline of grid-related and renewable energy projects, providing continued earnings visibility for EPCC players. Rakuten Trade maintained an Malaysia’s current account surplus rose to 2% of gross domestic product in the first three quarters of 2025, up from 1.4% in 2024, underpinned by strong E&E exports, a recovery in tourism receipts and sustained foreign direct investment (FDI) inflows. Meanwhile, the ringgit appre ciated 10.1% against the US dollar in 2025, the strongest gain among regional currencies. Amro chief economist Dong He attributed the currency’s perfor mance to policy credibility and tangible progress in fiscal reform. “The strong performance of the ringgit reflects the progress of fiscal reforms that Malaysia has imple mented, as well as policy clarity and credibility.” He noted that Malaysia has attracted sustained capital inflows, reflecting investor confidence in macroeconomic management and reform momentum. Addressing concerns that a stronger ringgit could erode export competitiveness, Dong said, Malaysia’s manufacturing structure mitigates part of the impact. “Malaysia’s exports are diversified across markets and products, parti cularly in E&E and petrochemicals.

overweight stance on the power, utilities and renewable energy sector, citing its earnings defensiveness, stable dividend yields of 3% to 5%, and long-term growth visibility anchored by Malaysia’s energy transition targets and structurally rising electricity demand. Meanwhile, Kenanga Research said the first quarter of 2026 could be a busy and catalyst-rich period for the RE sector, driven by new solar tenders, policy developments and rising electricity demand from data centres. The research house said the potential rollout of Large Scale Solar 6 bids in the current quarter would add to construction-award visibility as LSS5+ projects progressively move into the execution phase, sustaining momentum for EPCC players. At the retail level, Kenanga said, the Solar for All at Premises (Solar Atap) programme unveiled at end-2025 to replace the expired Net Energy Metering 3.0 scheme is expected to reinvigorate rooftop solar adoption. Applications under Solar Atap com menced on Jan 1, 2026, providing a Much of the manufacturing involves imported intermediate goods, so a stronger ringgit reduces import costs and partially offsets export price pressures,” he explained. Looking ahead, Amro cautioned that risks remain tilted to the downside. Renewed trade frictions, higher tariffs and tighter technology controls could disrupt export oriented manufacturing and delay multinational investment decisions. Malaysia’s deep integration into global supply chains, especially in semiconductors, makes it exposed to shifts in US-China technology policies. While certain semicon ductor products are currently exempt from additional tariffs, any change in policy could pose risks to growth. Dong said the current global tech upcycle could persist for “another year or two”, supported by structural demand for semiconductors, AI applications and data centre capacity across the region. However, he warned against complacency during boom periods. “In boom times, we need to be aware of potential risks. If there is a lot of borrowing going on to finance investments and there is a sharp pullback, the financial sector might

Peh (left) and Dong at a press briefing following the Asean+3 Macroeconomic Research Office’s annual consultation visit to Malaysia.

fresh trigger for demand from households and commercial users. Beyond solar, bidding activity for an additional 300MW quota under the Feed-in Tariff mechanism is expected to begin this month, reinforcing the broader acceleration in renewable energy deployment as Malaysia advances its national energy-transi tion agenda. Kenanga also highlighted TNB’s strong energy sales outlook, supported by rising demand from data centres with a combined capacity requirement of about 7.1GW. The Corporate Renewable Energy Supply Scheme (Cress), which enables long-term power offtake at com petitive rates, is seen as an attractive option for data centre operators, particularly ultra-high-voltage cus tomers. As of June 2025, committed capacity under Cress had reached 1.3GW. Spillover benefits from the data centre boom are expected across the electrical infrastructure value chain. Kenanga cited opportunities for players involved in switchgear and be exposed,” Dong said. He stressed that policymakers should guard against excessive leverage buildup while taking ad vantage of the investment cycle to upgrade domestic capabilities. Fiscal consolidation is expected to continue, with the deficit projected to narrow to 3.8% of GDP in 2025 from 4.1% in 2024, extending the improve ment trend since 2022. Revenue gains from SST expansion, improved tax compliance through e-invoicing and subsidy rationalisation have strengthened fiscal outcomes. Amro encouraged authorities to broaden the tax base and continue reforms to create durable fiscal space, while redirecting spending towards productivity-enhancing investments and targeted social support.

extra-low-voltage systems, naming Pekat Group Bhd as a potential beneficiary. Execution capability remains a key differentiator, with Kenanga noting that companies able to scale quickly through partnerships and backed by proven delivery track records are likely to outperform. Corporates are also increasingly locking in solar panel prices to manage cost volatility. Overall, Kenanga said the RE sector remains firmly in a fast-growth phase, with companies under its coverage ex pected to collectively deliver earnings growth of about 26% in FY26, sup porting sector valuations of between 20 and 30 times earnings. It main tained its overweight call on the sector, naming Solarvest Holdings Bhd and KJTS Group Bhd as its top picks. Kenanga added that discussions on a proposed climate change bill that is expected to provide clarity on carbon-tax implementation are understood to take place during the first parliamentary sitting of 2026, which could bolster policy support and investor interest in the sector. “In this AI age, upgrading workers’ skills will be a very important policy priority,” he said, adding that pro ductivity gains and sustained real wage growth would help underpin consumption on a more durable basis. With growth holding above 4%, inflation contained at around 2% and the ringgit strengthening on the back of reform progress, Malaysia entered 2026 from a position of relative resilience, though external uncer tainties and global trade frag mentation will remain key variables shaping the outlook. Over the longer term, Dong em phasised the need to raise domestic value-added content and accelerate skills upgrading to ensure Malaysia captures greater benefits from FDI in higher-technology sectors.

Ű BY HAYATUN RAZAK sunbiz@thesundaily.com Sunny outlook for Malaysian renewable energy sector