Malaysia Economics: Mining Led 2Q GDP Rebound Unlikely To Trigger OPR Hike Amidst Benign Jun CPI

Research evidence excerpt

Malaysia Economics: Mining Led 2Q GDP Rebound Unlikely To Trigger OPR Hike Amidst Benign Jun CPI

Malaysia Economics

17 July 2026 Citi Research

….as an expected moderation in E&E export momentum and moderate PCE

offsets some rebound in tourism and mining, with risks to the upside – A key

driver of near term sequential strength into 3Q26 is the reversal of previous

headwinds - which have been felt most in the tourism sector, and also concerns in

manufacturing from physical shortages of key production inputs – into tailwinds,

even as sporadic re-escalations in the Straits of Hormuz may temper expectations

on the latter. The primary growth driver however remains the global AI upcycle,

which continues to fuel robust demand for E&E—and semiconductor exports. This

export resilience, combined with the realization of earlier investment approvals, is

cushioning manufacturing foreign direct investment. This landscape is further

augmented by a strong pipeline of data center-related projects and robust

investment momentum in the Johor-Singapore Special Economic Zone. However,

because of the capital-intensive nature of AI activities and prior labor hoarding, the

immediate spillover of growth into new jobs has been limited, and services job

creation has slowed, such that the unemployment rate edged up to 3% in Apr-May

– the first increase since 2021. Total employment in fact fell 0.22% YoY in May 2026

– the first YoY decline since Feb 2021. Consequently, consumer spending has

moderated, despite support from civil servant wage adjustments and SARA cash

transfers, with both wholesale and retail sales slowing in Apr-May vs 1Q26.

Meanwhile, supply-side drags from El-Nino may continue to be felt near term on

the CPO and broader agriculture sector, with the impact felt more on growth than