KUALA LUMPUR: Domestic demand is expected to register a growth of 5.4% in 2026, steered by sustained private sector expenditure at 5.7%.
The strong consumption and investment activities will keep the private sector’s contribution significant at 4.5 ppt to GDP growth.
Meanwhile, public expenditure is anticipated to rise by 4.4%, contributing 0.8 ppt to overall growth.
According to the report, sustained income growth and favourable employment prospects will drive a 5.1% growth in private consumption.
In addition, spillover effects from the implementation of Phase 2 of the SSPA, STR, and Budi Madani RON95 (BUD195) targeted subsidy program are expected to provide further impetus to household spending, particularly among lower- and middle-income groups.
Consumer spending will also be stimulated by higher tourism-related activities alongside major national and international events, including VM2026 and MAHA 2026, as well as the 2026 FIFA World Cup and the BWF Thomas & Uber Cup 2026.
Moving on, the report said private investment is anticipated to register a growth rate of 7.8% in 2026, driven by increased capital spending on structures, machinery, and equipment in technology-intensive manu-facturing and services sectors.
A large volume of approved investments is expected to be realised, particularly in semicon-ductors, renewable energy, and data centres.
This outlook is reinforced by the strong implementation track record, with the execution of 85.1% of manufacturing projects approved between 2021 and June 2025.
Externally, the report said strong global demand for E&E, coupled with automation and digitalisation is expected to further stimulate investment in high-value and innovation-led activities.
At the same time, ongoing initiatives such as GEAR-UP and the rollout of national masterplans will strengthen investor confidence and Malaysia’s position as a competitive investment destination.
Public consumption is projected to grow by 3.2% in 2026, primarily driven by increased spending on emoluments following salary adjustment under Phase 2 of the SSPA.
Expenditure on supplies and services is expected to remain steady, ensuring the continued delivery of essential public services while aligning with the government’s fiscal discipline and value-for-money principles.
Public investment is anticipated to expand by 7.3% in 2026, mainly driven by increased capital spending by public corporations, which are estimated to account for about 70% of total public investment.
According to the report, growth will be further underpinned by key developments in strategic sectors including utilities, energy, and transportation, to support economic resilience and future growth.
This includes projects to enhance electricity generation capacity and upgrade railway networks and public transport systems.
Public investment is also expected to gain momentum in the first year of the 13th MP, driven by the implementation of new people-centric projects aimed at improving public well-being such as the construction of a cancer centre in the northern region, the upgrading of Miri airport terminal, and a program to strengthen national food security.
These initiatives will be supported by GLICs’ strategic investments in priority sectors.
The report said public investment activities will continue to strengthen the national development agenda and promote inclusive, sustainable growth.
Furthermore, the report predicts that GNI will increase by 5.3% to RM2,064.2 billion in 2026 at current prices.
The share of GNS as a percentage of GNI remains high at 22.9%, primarily contributed by the private sector savings.
Meanwhile, total investment is expected to increase by 6.2% to RM450.5 billion and account for 21.8% of GNI.
The savings-investment gap is expected to record a surplus of RM23.2 billion, or 1.1% of GNI, providing ample liquidity for long-term productive investment.
