KUALA LUMPUR: S&P Global Ratings has lifted its 2026 gross domestic product (GDP) growth forecast for Asia-Pacific to 4.3% from 4.0%, with the Malaysian economy now projected to grow at a faster pace of 4.5%.
In its Economic Outlook Asia-Pacific First Quarter 2026: Signs of Relief report, S&P cited resilient demand, stronger technology exports and reduced tariff uncertainty for the improved regional outlook.
“We think a tentative thaw in United States-China ties and, in many economies, resilient domestic demand should help Asia-Pacific growth hold up in 2026,” the credit rating agency said.
According to the report’s tables, Malaysia’s GDP growth has been revised upwards by 0.2 percentage points (ppts) to 4.5% in 2026, with consumer inflation at 1.9% and policy rate steady at 2.75%.
S&P Global Ratings senior economist based in Singapore, Vishrut Rana, said Malaysia’s economy is showing robust growth, supported by strong electronics sector activity and resilient domestic demand.
“We expect greater trade frictions to weigh on Malaysia’s – and the rest of Asia’s – external demand next year, although easing trade-related uncertainty in recent months has reduced some risks to the outlook.
“Steady domestic activity, ongoing fiscal support, strong investment and construction activity for infrastructure and private capex are all factors supporting the growth outlook,” he added.
Vishnut said inflation remains contained on the back of low energy inflation and contained food inflation.
“Core inflation is stable around the 2% mark, and we expect overall inflation to increase to that range from current rates near 1.5%. Bank Negara Malaysia is unlikely to tweak policy settings with policy rates close to neutral rates around three per cent and inflation gradually picking up,” he said.
For China, S&P raised its 2026 GDP forecast to 4.4% from 4.0% previously due to a reduction in US tariffs on the country and the economic resilience shown in the third quarter of 2025.
For Asia, excluding China, the rating agency said both exports and domestic demand generally held up well through 3Q 2025, supported by strong shipments of technology products such as semiconductors.
“We still expect a slowdown in much of the region in 2026, stemming from the US tariffs. But we have revised up our export forecasts on an improved outlook for tech exports and the relatively favourable outcome of the US-China negotiations.
“In all, we have raised our 2025 GDP growth forecasts for Asia-Pacific, excluding China, by 0.2 ppts to 4.4% and the 2026 one by 0.2 ppts to 4.2%,” the rating agency added.
However, S&P said that it expects uncertainty around US tariffs to remain in 2026, in part because of indications that the US administration may use tariffs for political purposes although visibility has improved.
Meanwhile, it said Asia-Pacific central banks have lowered their policy rates by an average 65 basis points (bps) so far in 2025, following an average cut of 40 bps in 2024.
“We see little scope for further cuts, chiefly because policy rates have for the most part already descended close to our estimates of neutral policy interest rates.
“Among key factors influencing monetary policy, inflation is not currently a problem in Asia-Pacific. We expect consumer inflation to mostly remain low amid moderate energy prices and redirection of exports away from the US,” it added.
In general, S&P said, Asia-Pacific currencies are expected to strengthen slightly against the US dollar through to the end of 2026. – Bernama
