Malaysia’s growth remains intact with strong domestic demand and exports, supported by the global AI upcycle, says BNM governor Abdul Rasheed.
KUALA LUMPUR: Malaysia’s economy remains resilient despite mounting risks from the ongoing West Asia conflict, supported by strong domestic demand, sustained investment activity and robust exports linked to the global technology and artificial intelligence (AI) upcycle.
Bank Negara Malaysia (BNM) Governor Datuk Seri Abdul Rasheed Ghaffour said Malaysia’s growth momentum remains intact, underpinned by private consumption, ongoing multi-year investment projects and continued implementation of government development initiatives.
“Growth momentum is continuing, driven by domestic demand and strong exports. Investment and consumption are still holding up. This will help drive Malaysia’s growth for the rest of the year.
“Employment conditions remain good. Unemployment stood at 2.9 per cent in February. Wages are still growing and government policy support remains in place to sustain consumption,” he told Bernama.
Abdul Rasheed said targeted support and subsidies would help cushion household spending amid rising global uncertainties.
He also noted that strong global demand for AI- and digitalisation-related investments has supported Malaysia’s growth in the first quarter of 2026 (1Q 2026), with the momentum likely to continue into the second half of the year.
Additionally, projects approved by Malaysian Investment Development Authority (MIDA) continue to record high realisation rates, while government spending under Budget 2026 and the 13th Malaysia Plan is expected to support economic activity.
Beyond this, Malaysia’s financial sector remains strong, ensuring continued financing for the economy despite current stress.
On the gross domestic product (GDP) forecast of 4.0 to 5.0 per cent for 2026, he said BNM has already factored in the impact of the West Asia conflict, including higher energy prices, supply chain disruptions and uncertain global growth momentum.
“Our range is wide enough to capture the current risks. We had already taken this into account when setting the 4.0 to 5.0 per cent forecast,” he said.
Nonetheless, he said conditions remain uncertain, with the impact on Malaysia depending on the intensity and duration of the conflict.
Abdul Rasheed also noted that international projections remain within BNM’s range, with the World Bank forecasting 4.4 per cent, the ASEAN+3 Macroeconomic Research Office (AMRO) 4.6 per cent, and the International Monetary Fund (IMF) 4.7 per cent.
He said the current Overnight Policy Rate (OPR) at 2.75 per cent is appropriate and consistent with the Monetary Policy Committee’s latest growth and inflation outlook.
At the same time, he acknowledged that the impact of the West Asia conflict had started to filter into higher price pressures, with Malaysia’s inflation rate rising to 1.6 per cent in 1Q 2026 from 1.4 per cent a year earlier.
However, the pass-through of higher global costs into domestic prices remains contained due to subsidies, price controls, and enforcement measures against profiteering.
“Price pressures remain contained for now, but we must stay vigilant. We are alert and monitoring developments very closely,” he said.
He assured that BNM would continue to closely monitor developments in West Asia and conduct ongoing assessments of their implications for Malaysia’s growth and inflation outlook.
He added the country had undertaken reforms to strengthen its resilience and ability to absorb external shocks, while policymakers would prudently utilise available fiscal and monetary policy buffers going forward.
Abdul Rasheed, who is also a member of the National Economic Action Council, said the government’s initial priority amid the West Asia conflict was to ensure sufficient domestic fuel supply and maintain adequate stockpiles.
He said authorities have been closely monitoring supply levels, including assessing existing reserves and securing alternative sources should disruptions occur in current supplier countries.
He also noted that Malaysia benefits from the global network and capabilities of Petroliam Nasional Bhd (Petronas), which enabled the national oil company to source crude oil and feedstock from various markets if necessary.
