Hong Leong Investment Bank (HLIB) expects Malaysia’s economy to expand by 5.4% in the first quarter of 2026, slightly above the advance estimate released by the Department of Statistics Malaysia (DOSM) and the market consensus of 5.3%.
The research house said the anticipated growth would mark a moderation from the 6.3% expansion recorded in the fourth quarter of 2025, but remains supported by continued resilience across the services, manufacturing, agriculture and construction sectors.
Malaysia’s full first-quarter gross domestic product (GDP) data is scheduled for release on May 15, 2026.
HLIB said domestic demand is expected to remain the key growth driver, alongside positive contributions from net exports amid stronger export performance.
The services sector is projected to continue expanding, albeit at a slightly slower pace, following softer growth in the volume index of services, which rose 5.8% in the first quarter compared with 6.5% in the preceding quarter.
The moderation was broad-based across several subsectors, including wholesale and retail trade, food and beverage, accommodation, business services, finance, information and communication, transportation and storage.
Meanwhile, the manufacturing sector is expected to remain relatively stable, supported by a 5.7% rise in the manufacturing industrial production index (IPI), slightly below the 6.0% growth recorded previously.
HLIB said the sector continues to benefit from robust external demand for electrical and electronics (E&E) products amid the ongoing global semiconductor upcycle.
The research house highlighted that global semiconductor sales surged 62.4% year-on-year in the first quarter, compared with 25.6% growth in 2025.
It added that manufacturing growth was also supported by stronger output in wood products, printing and non-metallic mineral products.
However, the agriculture sector is expected to grow at a slower pace following moderation in crude palm oil production growth to 11.5% from 18.7% previously.
The construction sector is also anticipated to maintain positive momentum, although growth is expected to ease to 8.5% from 10.3% in the preceding quarter as activity in non-residential buildings and civil engineering normalises.
HLIB expects the mining sector to contract during the quarter, weighed down by lower crude petroleum and natural gas production.
On the demand side, private consumption is projected to remain supportive, underpinned by stable labour market conditions and continued wage growth in both the services and manufacturing sectors.
The unemployment rate remained unchanged at 2.9% in the first quarter, while wage growth in the services sector held at 5% and manufacturing wages expanded 2.3%.
Consumer spending is also expected to be supported by policy measures introduced by the government, including the RM100 Sumbangan Asas Rahmah (SARA) cash aid, the second phase of civil servant salary adjustments under the Public Service Remuneration System, continued RON95 fuel subsidies and diesel subsidy assistance.
The reintroduction of the RM1,000 personal income tax relief for domestic tourism is also expected to provide additional support to household spending.
On the external front, HLIB said net exports are likely to contribute positively to GDP growth as export growth accelerated to 12.7% in the first quarter from 11.0% previously, while import growth moderated to 7.7%.
Despite lingering risks from global energy supply disruptions, HLIB maintained its full-year 2026 GDP growth forecast at 4.5%, which is within Bank Negara Malaysia’s official target range of 4.0% to 5.0%.
The research house said Malaysia’s economic resilience continues to be supported by its position as a net exporter of oil and gas, exposure to the global technology upcycle and ongoing fiscal support measures.
