MBSB Research has raised its 2026 Malaysia GDP growth forecast to 5.1%, citing stronger-than-expected first-half economic performance, resilient domestic demand and continued global appetite for the country’s technology and electrical and electronics (E&E) products.
The research house said Malaysia’s near-term growth momentum remains intact, with the Leading Index (LI) expanding 1.3% year-on-year, accelerating from 1.1% in May 2026.
The improvement was supported by higher real imports of basic precious and non-ferrous metals, alongside stable growth in real semiconductor imports, broadly consistent with resilient exports and production within the E&E industry.
MBSB’s upgraded 5.1% forecast would put economic growth just below the 5.2% expansion recorded in 2025.
The stronger outlook follows Malaysia’s robust performance in the first half, with GDP growth accelerating to 6% year-on-year in 2Q26 from 5.4% in the preceding quarter.
The second-quarter performance also came in marginally above the earlier advance estimate of 5.8%.
MBSB said the acceleration was driven by stronger services and manufacturing activity, a rebound in mining output and continued strength in domestic spending.
Domestic demand remained the principal growth engine, contributing 3.7 percentage points, or about 61%, of overall second-quarter GDP growth.
At the same time, the contribution from net exports strengthened significantly to 2.4 percentage points from 0.6 percentage points in 1Q26, giving the economy support from both domestic and external demand.
Malaysia’s trade performance also remained robust heading into the second half.
Total trade expanded 37.3% year-on-year in July, following a 44.3% increase in June, marking an 11th consecutive month of double-digit growth.
Export growth moderated to 38% from 45.5% in June but remained strong. Re-exports increased 41.2%, while domestic exports grew 36.9%.
Imports similarly expanded by a substantial 36.4% year-on-year, albeit moderating from 43.1% previously, driven mainly by purchases of E&E products, machinery and petroleum products.
The strength in technology-related trade reinforces MBSB’s view that Malaysia continues to benefit from rising global demand for technology and E&E products, while sustained domestic expenditure provides a second pillar for growth.
Despite upgrading its full-year forecast, MBSB cautioned that Malaysia remains exposed to a range of external risks that could temper growth during the remainder of 2026.
These include a potential escalation in geopolitical tensions, prolonged disruptions to global trade and supply chains, higher global inflation and tighter international trade rules.
A weakening in final demand in major economies could also weigh on Malaysia’s export-oriented industries.
For now, however, the combination of 6% second-quarter GDP growth, strong technology exports and sustained domestic demand provides a firm foundation for the economy entering the second half of 2026, supporting MBSB’s upgraded 5.1% full-year growth projection.
