Malaysia’s consumer spending is expected to remain resilient through 2026 and 2027, supported by low inflation, stable employment and rising real wages, although elevated household debt and global economic uncertainties continue to pose risks, according to BMI.
In its latest consumer outlook report, BMI forecasts real household spending to expand 4.2% in 2026, reaching RM1.10 trillion at 2010 constant prices, before growing a further 4.1% to RM1.14 trillion in 2027. The projected spending levels are well above pre-pandemic levels.
BMI said Malaysia’s low inflation environment and stable labour market would underpin consumer purchasing power, offsetting the impact of relatively high household debt.
The research house expects inflation to average 1.9% in 2026, rising modestly to 2.1% in 2027, with government price controls on RON95 petrol helping to contain overall price pressures. Food inflation, which carries the largest weight in household spending, remained manageable at 1.4% year-on-year in May 2026.
Malaysia’s economy is forecast to expand 4.3% this year and 4.0% in 2027, while unemployment is expected to remain stable at 3.1%, supported by continued foreign investment, tourism recovery and growth in sectors such as manufacturing, electronics and agriculture.
BMI noted that the Bank Negara Malaysia’s decision to maintain the Overnight Policy Rate (OPR) at 2.75% throughout 2026 should provide households with greater certainty over borrowing costs. The research firm no longer expects an interest rate cut this year, but also sees little likelihood of further rate hikes in the near term.
The report highlighted that stronger real wage growth, expected to outpace inflation by an average of 2.8% annually over the medium term, will continue to support household purchasing power. BMI estimates Malaysian households will enjoy purchasing power approximately 18% higher in 2026 compared with 2019.
Retail activity has also remained robust, with retail sales growing 7.2% year-on-year in May 2026, reflecting improved household incomes and easing inflationary pressures.
However, BMI cautioned that Malaysia’s high household debt remains a structural vulnerability. Household debt stood at 69.8% of GDP in the fourth quarter of 2025, leaving consumers exposed to prolonged periods of elevated interest rates.
The report also warned that external risks could weigh on consumer confidence. These include geopolitical tensions in the Middle East, higher global energy prices, rising trade barriers, supply chain disruptions and slower global economic growth.
While Malaysia’s status as a net energy exporter provides some buffer through stronger petroleum revenues and dividends from Petronas, BMI expects fiscal policy to remain contractionary as the government continues its fiscal consolidation efforts, potentially limiting growth in disposable incomes.
Despite these headwinds, BMI maintains that Malaysia’s consumer sector remains on a stable footing, with resilient domestic demand expected to continue supporting retail spending over the next two years.
