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THE Government has cautioned that the global economic environment remains fragile, with prolonged geopolitical tensions continuing to disrupt energy markets, commodity pricing, logistics networks and international supply chains, according to a briefing presented at the 10th National Economic Action Council (MTEN) meeting for 2026.
Economy Minister Akmal Nasrullah Mohd Nasir said the spillover effects of these disruptions are increasingly evident, gradually feeding into production costs, business operations and household expenditure, underscoring Malaysia’s vulnerability as an open, trade-dependent economy.
In the energy market, Brent crude prices showed signs of easing in early May 2026, averaging US$108.40 per barrel between 5 and 8 May, an 8.5 per cent decline from the previous week’s US$118.50.
However, authorities stressed that prices remain substantially elevated compared with pre-crisis levels of around US$68.84 per barrel before the global energy shock began in February 2026.
Natural gas prices also declined marginally by 1.5 per cent to US$17.41 per MMBtu, while coal prices remained broadly stable with a slight increase of 0.1 per cent to US$133.19 per metric tonne.
MTEN noted that while this suggests partial stabilisation in energy markets, volatility risks remain significant.
Despite external headwinds, Malaysia’s macroeconomic fundamentals remain firm, Akmal said at a media conference held after the meeting on Tuesday.
Bank Negara Malaysia maintained the Overnight Policy Rate at 2.75 per cent on 7 May 2026. Inflation remains contained, averaging 1.6 per cent headline inflation and 2.1 per cent core inflation in the first quarter of 2026, while preliminary GDP growth stood at 5.3 per cent.
Equity markets reflected continued investor confidence, with the FBM KLCI closing at 1,748.06 points on 8 May 2026, up 2.1 per cent week-on-week.
Commodity performance also provided support to the external sector. Crude palm oil prices rose 1.2 per cent to RM4,558 per tonne, while rubber prices increased 2.3 per cent to 874 sen per kilogram. MTEN said these gains are expected to benefit smallholders and support rural incomes.
In the manufacturing sector, momentum continued to strengthen, with the S&P Global Malaysia Manufacturing Purchasing Managers’ Index rising to 51.6 in April 2026, the highest level in four years. A reading above 50 signals expansion, driven by improved demand and production activity.
However, firms reported increasing reliance on inventory buffers and longer supplier delivery times, indicating ongoing supply chain strain and elevated input costs.
Industrial output also remained resilient, with the Industrial Production Index rising 3.1 per cent in March 2026, supported by a 5.5 per cent expansion in manufacturing, particularly export-oriented electronics and optical products, despite external cost and logistics pressures.
In the services sector, the Producer Price Index rose 2.1 per cent in the first quarter of 2026, up from 1.0 per cent previously, driven by higher costs in accommodation, food and beverage services, and transport, signalling the gradual transmission of inflationary pressures into consumer-facing industries.
Food prices remain broadly contained but are showing early signs of upward movement. Between 4 and 6 May 2026, selected food items recorded movements ranging from a 2.0 per cent decline to a 6.7 per cent increase.
Beef prices fell 1.4 per cent to RM35.88 per kilogram, while chicken prices remained stable. However, increases were recorded in items including mackerel, prawns, leafy vegetables and coconut milk, with coconut milk rising 6.7 per cent to RM16.88 per kilogram.
Although overall inflation indicators remain manageable, MTEN acknowledged concerns that some households, particularly in rural areas, are already experiencing rising pressure on daily necessities.
As a result, MTEN directed the Chief Secretary to the Government to coordinate with all ministry secretaries-general to ensure that assistance and interventions are effectively targeted towards low-income and vulnerable groups.
Shifts in consumer behaviour are also becoming more apparent. Public transport usage rose significantly, with average daily rail passengers increasing 7.6 per cent in April 2026 to 1,085,580, while bus ridership grew 10.3 per cent to 227,448 passengers per day, reflecting a move towards more cost-efficient mobility options.
Electricity consumption also recorded a modest 1.4 per cent increase in peak demand, indicating stable usage patterns despite fluctuating weather conditions.
MTEN said these behavioural adjustments suggest households are gradually recalibrating spending patterns in response to global cost pressures, including greater reliance on public transport and more cautious consumption habits.
The council also highlighted mounting pressure on micro, small and medium enterprises, particularly market traders and small operators affected by rising operating costs, weak cash flow and dependence on limited income sources. Without intervention, MTEN warned, the risk of business closures could rise.
Local authorities under the Ministry of Housing and Local Government reported wide variations in rental rates for business premises depending on category and location, with rental costs in some cases accounting for between 7 and 58 per cent of operating expenses.
Following recent policy announcements, federal agency Majlis Amanah Rakyat (MARA) has implemented a 20 per cent rental reduction across more than 7,000 business premises nationwide from May 2026.
Kuala Lumpur City Hall has also introduced a 50 per cent reduction for selected hawker stalls and premises from April 2026 to December 2027, expected to benefit more than 10,000 traders, while Selangor is preparing similar measures.
MTEN urged all local authorities and state governments to consider implementing targeted rental reductions where feasible, based on fiscal capacity and local conditions, to support small traders and sustain grassroots economic activity.
Officials said the objective is to preserve business continuity, safeguard employment and prevent an increase in vacant commercial spaces during a period of global uncertainty.
In parallel, MTEN noted progress in the development of a Global Supply Crisis Monitoring Dashboard jointly developed by the Ministry of Economy and the Department of Statistics Malaysia (DOSM), which is expected to be accessible to the public from 15 May 2026.
The dashboard will provide real-time indicators across 10 key areas, including energy, commodities, cost of living, economic performance, foreign exchange and trade flows.
A separate internal version will be used for government risk monitoring and coordination, enabling earlier detection of supply shocks and faster policy responses.
Officials described the initiative as a significant shift towards data-driven governance in managing global economic risks.
World Bank Findings Review
MTEN reviewed findings from the World Bank, which noted that global price pressures are emerging in overlapping layers, particularly involving energy, fertiliser and food, with interconnected effects on production costs and household spending.
The World Bank recommended that Malaysia prioritise energy security, strengthen fiscal space, manage demand, and ensure targeted support for the most affected households and businesses.
Authorities said these recommendations are broadly aligned with existing government measures, including supply chain coordination, energy management, export controls, rationing mechanisms and industry collaboration.
The government stressed that any policy adjustments will remain cautious, targeted and temporary, with priority given to protecting households, stabilising supply chains and maintaining fiscal discipline.
MTEN said it will continue to closely monitor global developments and update policy responses as needed to safeguard domestic supply security while maintaining confidence in Malaysia’s economic stability and long-term growth trajectory. - May 12, 2026
