Asia Economic Notes: Malaysia: Strong 1Q'26 growth; slowdown ahead

Research evidence excerpt

Asia Economic Notes: Malaysia: Strong 1Q'26 growth; slowdown ahead

Deutsche Bank

Research

Asia Economics Date

Malaysia 10 June 2026

Asia Economic

Notes

Malaysia: Strong 1Q'26 growth;

slowdown ahead

Kaushik Das

n Malaysia's economy exceeded expectations for a second consecutive

Chief Economist

quarter, growing 5.4%yoy in Q1 2026.

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n Even factoring in some slowdown in the remaining quarters, on account of

the lagged impact of the West Asia crisis, we believe Malaysia remains well

poised to record around 4.5%yoy growth in 2026, as per our forecasts.

n CPI inflation touched 1.9%yoy in April. While further subsidy rationalization

is likely, CPI is still likely to average around 2.0-2.1% in 2026.

n We do not anticipate any emergency on the part of the Malaysian

authorities to hike policy rates in the near future.

n The government is trying hard to stick to the fiscal deficit target, but some

slippage is likely, as per our estimates.

n We remain broadly constructive on MYR's prospects, though it is possible

that the BNM may intervene and shore up more reserves, in case MYR were

to appreciate rapidly post a de-escalation of the war.

Macro outlook for the rest of 2026

* Growth: Malaysia’s economy exceeded expectations for a second consecutive

quarter, growing 5.4%yoy in Q1 2026 (though lower than 6.2%yoy recorded in the

fourth quarter of 2025), despite heightened global uncertainty arising from the

conflict in West Asia. Domestic demand expanded by 5.2%yoy, supported by

steady household spending amid a buoyant labour market and higher disposable

income. Private consumption grew 4.7%yoy in 1Q 2026, while private investment

grew 7.8%yoy. Net exports surged 13.5%yoy, amid steady export growth and a

faster moderation in imports.