KUALA LUMPUR: Malaysia’s economy is expected to grow by 5.5% in 2026, driven by resilient domestic demand, sustained investment and strong electronics exports, according to HSBC Global Investment Research, which has raised its growth forecast from 5.2%.
The revised projection would mark the third consecutive year of growth exceeding 5%, placing Malaysia among the region’s stronger-performing economies.
HSBC senior Asean economist Yun Liu said Malaysia was one of only two Asean economies, alongside Singapore, benefiting significantly from the artificial intelligence (AI) boom, supported by robust demand for electronics.
“Its electronics exports continue to boom, growing by a record pace of 60% year-on-year (y-o-y), measured on a three-month moving average basis,” she said.
Malaysia’s position as one of only three net energy exporters in Asia would also provide an additional growth buffer amid elevated commodity prices, Liu added.
However, HSBC said the country’s growth momentum was not driven by external trade alone, with household consumption and investment continuing to provide important support.
Both components are expected to remain growth contributors, although investment growth has slowed to single digits after recording two consecutive years of double-digit expansion.
Liu said infrastructure spending remained supportive, but several major projects were approaching their operational stages. Malaysia had also become more selective in approving private data centre investments amid environmental and regulatory considerations.
Household consumption, meanwhile, was expected to remain resilient, underpinned by relatively low inflation and government subsidies.
HSBC noted that headline inflation averaged 1.8% year-on-year in the year-to-date period, while core inflation remained relatively stable at around 2%.
The subsidised RON95 petrol price of RM1.99 per litre, alongside a monthly allocation of 300 litres for eligible motorists, had helped contain cost pressures.
Liu said Malaysia’s subdued inflation contrasted with conditions in regional economies such as the Philippines and Vietnam, which were more exposed to fluctuations in global commodity prices.
Budget 2027 was also expected to provide further support for household spending next year.
On monetary policy, HSBC expects Bank Negara Malaysia (BNM) to maintain the overnight policy rate (OPR) at 2.75% at its Nov 5 meeting, despite a more hawkish tone in its latest policy statement.
Liu said the removal of the word “appropriate” from BNM’s description of its monetary policy stance suggested greater flexibility towards normalisation, rather than signalling the start of a sustained rate-hiking cycle.
“We do not believe current underlying inflation is strong enough to trigger BNM to hike imminently,” she said.
HSBC expects BNM to raise the OPR by 25 basis points in the first quarter of 2027, viewing such a move as pre-emptive rather than a response to accelerating inflation.