World Bank lifts Malaysia 2026 growth forecast to 5.1pct on stronger economy

KUALA LUMPUR: The World Bank has raised its 2026 growth forecast for Malaysia to 5.1 per cent, an upward revision of 0.7 percentage points from its previous projection, citing stronger-than-expected economic activity in the first half of the year.

In its Malaysia Economic Monitor report, the World Bank said domestic demand would remain the main driver of growth, supported by continued job creation, targeted fiscal transfers and the gradual implementation of approved multiyear investment projects.

"On the external side, export growth is projected to moderate as the temporary boost from frontloaded shipments, partly brought forward ahead of US tariff measures, dissipates.

"Nonetheless, the goods and services surplus is expected to widen as the moderation in private investment weighs on import demand," the report said.

It said economic growth is expected to ease to 4.7 per cent in 2027 as growth in consumption, investment and public spending moderates.

Meanwhile, the World Bank expects inflation to rise modestly to around two per cent this year, mainly due to base effects as the impact of administered price reductions in 2025 fades in the second half of the year.

It said this would gradually bring headline inflation closer to core inflation.

"Price pressures are nonetheless expected to remain contained, with the targeted fuel subsidy mechanism limiting the pass-through of higher global energy prices to domestic households," it added.

The World Bank said risks to Malaysia's economic outlook are largely external.

Downside risks include weaker global demand, a sharper-than-expected reversal in frontloaded exports, broader tariff measures on electrical and electronics exports, and disruptions stemming from the Middle East conflict.

"Domestically, cost of living concerns, adverse weather conditions and persistent uncertainty could weigh on household consumption and business capital spending.

"On the upside, stronger global technology demand, higher tourism activity, and additional household support could lift growth above the baseline," it said.