KUALA LUMPUR: Malaysia’s economy is expected to grow at 4.5% in 2026, supported by domestic demand, investment and tourism activities under the Visit Malaysia 2026 campaign, according to AmBank Research.
The research house raised its full-year 2025 growth forecast to 4.9% from 4.6% earlier, citing stronger-than-expected second-half momentum, the ongoing artificial intelligence-driven semiconductor upcycle and improving clarity on global trade conditions.
AmBank Group chief economist Firdaos Rosli said private consumption and investment would remain key drivers of growth in 2026, with potential upside risks from government cash assistance and tourism incentives.
“Private consumption will remain good at around 4.9%, possibly higher if SARA cash assistance is disbursed early and fully spent in the first quarter, and with tourism receipts expected to be strong,” he disclosed at AmBank’s media briefing on Malaysia’s Macroeconomic Outlook 2026 today.
“Domestic tourism should also benefit from the additional RM1,000 tax relief for domestic travel, so we see consumption remaining healthy with potential upside risks,” he added.
Firdaos said continued fiscal support had helped sustain household spending and ensure the benefits of growth were broadly shared across the economy. “The government’s ability to continue using cash transfers as a key policy lever to keep private consumption at a healthy level, while ensuring that households feel the fruits of a growing economy, is a positive development.”
Firdaos said that In many advanced economies, including the United States, the debate now is about the size of the K-shaped recovery, where growth benefits only certain segments of society.
“We are not seeing that dynamic in Malaysia,” he pointed out.
Firdaos said private investment, forecast to grow 5.9% in 2026, remained at a healthy level despite moderating from a higher base in 2025, supported by the ongoing AI and capital expenditure cycle. “Although investment growth is coming down from a higher base, it should remain solid in 2026, largely driven by the AI-related capex cycle we are experiencing now.”
He added that stronger imports of capital goods would support export growth in the coming year and imports are growing slightly faster than exports, which they see as a conduit for exports to expand at a healthier pace in 2026 compared with 2025.
On the supply side, Firdaos said, growth would remain broad-based, led by the services sector, which accounts for about 60% of gross domestic product and is forecast to expand 5%. “We are now seeing all major sectors trending in positive territory, something we have not seen for more than a year. This points to broad-based growth for Malaysia.”
Firdaos also said the bulk of structural reforms under the current political cycle had largely been implemented, with their impact expected to materialise more fully over the next two years. “The policy heavy lifting has largely been done. The impact of these reforms should come through more clearly in 2026 and 2027, providing an additional tailwind for growth going forward.”
The outlook remained subject to balanced upside and downside risks, particularly from global trade tensions, the economist said.
“Downside risks stem mainly from a sharper slowdown in major trading partners such as China and the risk of a correction following the recent AI capex supercycle,” Firdaos said.
Meanwhile, AmBank Research expects Bank Negara Malaysia (BNM) to keep the Overnight Policy Rate (OPR) unchanged at 2.75% throughout 2026 on the back of a tight labour market and subdued inflation.
Firdaos said the OPR outlook is expected to remain stable following the pre-emptive 25 basis point cut last year.
“Following the pre-emptive 25bps cut in 2025, we expect the OPR to remain unchanged at 2.75% throughout 2026, barring significant shifts in economic conditions, an outcome we view as unlikely in the near-term. With the labour market expected to remain tight and inflation well-anchored, we see little impetus for BNM to adjust its current policy stance.”
(Bank Negara Malaysia’s Monetary Policy Committee maintained the OPR at 2.75% at its meeting today.)
Firdaos said the unemployment rate declined even further to 2.9% in November 2025, the lowest level since November 2014, signalling the labour market continued to strengthen, supported by stable economic conditions.
“We foresee the labour market to remain healthy in 2026, with hiring activity steady and the unemployment rate staying around 3% despite potential spillovers from a more challenging external trade environment.”
Additionally, he said, that employment growth has outpaced labour expansion since August 2021, indicating a strong job market and robust economic growth, which explains the latest unemployment rate outlook, as more people are being hired.
“We also note that around half a million Malaysians in the job market are currently unemployed. This is cause for alarm, as the labour force participation rate is at an all- time high, while the majority of the unemployed are actively seeking jobs,” he added.
Firdaos said job creation is likely to remain broad-based, particularly in services and manufacturing, with support from electronics or technology-driven industries.
“Wage growth for both services (Q3’25: 4.7% versus Q2’25: 4.2%) and manufacturing (Q3’25: 2.0% versus Q2’25: 1.8%) also continued its upward momentum, signalling a favourable labour market dynamic that can sustain job creation in these sectors.”
At the same time, government initiatives under Visit Malaysia 2026 are expected to further support employment opportunities in tourism-related sectors.
Firdaos said Malaysia’s headline inflation is expected to remain subdued at 1.8% in 2026, picking up from an estimated 1.4% in 2025.
“The uptick primarily reflects a low base effect and the anticipated lagged cost pass-through from water tariff adjustments and the expansion of Sales and Service Tax .”
However, he said, upward pressure will be partially offset by softer global commodity prices particularly oil and coal which should translate into lower fuel and electricity prices, together accounting for about 8.2% of the Consumer Price Index basket.
“Moreover, a stronger ringgit should reduce import costs, further containing inflationary pressures,” Firdaos concluded.
