The Malaysian economy is showing resilience, with a 6% GDP growth in the second quarter of 2026 (2Q26) outpacing government and market expectations. However, this growth is expected to moderate in the second half of the year, as economists predict a slowdown in GDP momentum. The key driver of this growth has been the acceleration in electrical and electronic (E&E) shipments overseas, fueled by artificial intelligence (AI) demand and stockpiling due to geopolitical tensions. This has supported manufacturing activity, but the central bank, Bank Negara Malaysia (BNM), remains cautious, projecting a 4% to 5% GDP growth for the year. Economists' views are divided, with some upgrading their projections and others maintaining their forecasts. The consensus is that growth has peaked and will slow in the second half of the year, with exports remaining supportive. CIMB Research, for instance, expects the benchmark overnight policy rate (OPR) to remain at 2.75% through the first half of 2027, with a hike contingent on evidence of sustained inflation or broader-based growth. MBSB Research has upgraded its GDP growth forecast to 5.1%, citing increased tourism activity and higher incomes, while also noting the economy's susceptibility to downside risks such as geopolitical tensions and supply disruptions. Kenanga Research, meanwhile, expects the OPR to remain at current levels, as growth has picked up without broad-based demand-side inflation. The research house has upgraded its GDP growth forecast to 5.3%, pointing to a pickup in private consumption, continued services expansion, and ongoing public and private investment. BIMB Research has also upgraded its GDP growth forecast to 5.5%, attributing this to the AI-led technology upcycle and continued support from tourism and private investments. Overall, the Malaysian economy is showing signs of resilience, but the central bank and economists remain cautious, expecting a slowdown in the second half of the year. The key will be to manage the economy's exposure to downside risks while supporting ongoing economic expansion.
