Malaysia: Solid GDP and contained inflation – DBS

DBS Group Research expects Malaysia’s 1Q26 advance Gross Domestic Product (GDP) to grow 5.5% year-on-year, slightly below 6.3% in 4Q25 but still robust. Growth is seen supported by export-oriented electrical and electronics manufacturing, global AI tailwinds, construction and domestic demand. Headline inflation is projected to rise modestly to 1.7% in March, with oil-driven pressures cushioned by fiscal subsidies.

AI tailwinds and mild price pressures

“Malaysia’s incoming data are likely to reflect resilient economic growth and contained inflation in 1Q26, despite the Middle East shock since February 27.”

“We expect robust advance GDP growth estimate of 5.5% yoy in 1Q26, albeit lower than 6.3% yoy in 4Q25.”

“Growth was likely supported by continued strength in export-oriented electrical & electronics manufacturing, bolstered by global AI tailwinds, as well as supportive domestic demand driven by ongoing construction and investment momentum, while services expanded robustly amid these spillovers, alongside sustained household spending.”

“We anticipate headline inflation to rise but remain contained at 1.7% yoy in March, from 1.4% yoy in February.”

“This reflected some upside pressures from food prices due to festive-related spending, and energy prices following the spike in global oil prices stemming from the Iran war, although the overall impact is mitigated by fiscal subsidies.”

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)