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BANK Negara Malaysia announced that the national economy expanded by 5.4 per cent during the first quarter of 2026, supported by sustained domestic consumption, strong technology-driven exports and continued investor confidence in Malaysia’s long-term economic reforms.
Although the pace of expansion eased from the 6.3 per cent growth recorded in the previous quarter, policymakers described the performance as a sign of underlying economic strength at a time when many global economies continue to struggle with geopolitical disruption and fragile supply chains.
A sharp rise in electrical and electronics exports emerged as a key pillar of growth, fuelled by international demand for artificial intelligence infrastructure, semiconductor components and data centre technology, reinforcing Malaysia’s strategic role in global manufacturing supply chains.
Domestic demand also remained resilient, underpinned by low unemployment, stable labour market conditions and targeted policy support aimed at sustaining household spending power.
Large-scale infrastructure projects and investment programmes continued to support economic momentum, with both private and public sector investment activity remaining robust amid high implementation rates for previously approved projects.
While the manufacturing sector maintained strong performance, growth in the services sector moderated after earlier surges in vehicle sales linked to the expiry of electric vehicle import duty exemptions.
The construction sector also returned to more moderate levels following earlier double-digit expansion, while the agriculture and mining sectors recorded softer performances due to normalising palm oil production and weaker oil and gas output.
Despite the healthy year-on-year growth figures, the economy registered a marginal quarter-on-quarter contraction of 0.01 per cent on a seasonally adjusted basis, reflecting the exceptionally strong expansion recorded at the end of 2025.
Inflationary pressures increased modestly during the quarter as the fallout from tensions in the Middle East pushed up global energy and commodity prices.
Headline inflation rose to 1.6 per cent from 1.3 per cent previously, driven largely by higher electricity tariffs and fuel prices involving RON97 petrol and diesel.
However, underlying price pressures remained relatively contained, with core inflation easing to 2.1 per cent as price growth slowed in sectors such as food services and residential rentals.
The central bank noted that broader inflationary trends remained manageable, with the share of consumer price index items recording monthly increases continuing to decline below historical averages.
The ringgit strengthened significantly during the quarter, outperforming several regional currencies despite heightened volatility in international financial markets.
Malaysia’s currency appreciated by 0.5 per cent against the US dollar and strengthened by 1.4 per cent on a nominal effective exchange rate basis against major trading partners.
As of 13 May 2026, the ringgit had gained 3.3 per cent against the US dollar since the start of the year, supported by foreign capital inflows, stronger macroeconomic fundamentals and growing confidence in Malaysia’s policy direction.
Credit growth within the banking sector also accelerated, led primarily by increased lending to businesses.
Outstanding loans to the private non-financial sector expanded by 5.6 per cent, while lending to small and medium-sized enterprises remained stable as financial institutions continued efforts to support businesses navigating global uncertainty.
To cushion firms from the impact of geopolitical disruption, Bank Negara introduced a RM5 billion SME Stabilisation Relief Facility aimed at supporting businesses affected by the Middle East conflict through working capital assistance and financing flexibility.
The central bank is also partnering with Credit Guarantee Corporation Malaysia Berhad to launch a RM10 billion guarantee scheme intended to strengthen SME resilience, sustainability and financial inclusion from June onwards.
Bank Negara Malaysia Governor Datuk Seri Abdul Rasheed Ghaffour said Malaysia remained in a comparatively strong position despite external risks facing the global economy.
“As a small and open economy, Malaysia will inevitably face both direct and indirect impact from the ongoing geopolitical conflict in the Middle East,” he said.
“Higher energy prices, supply chain disruptions, and heightened uncertainty are expected to weigh on the external environment. Nevertheless, the Malaysian economy is expected to remain resilient in 2026, with growth expected to come in within the range of 4% - 5%, supported by steady domestic demand and continued expansion in our export performance.”
Bank Negara expects inflation to average between 1.5 per cent and 2.5 per cent this year, with targeted subsidies and mitigation measures anticipated to help shield consumers from the full impact of higher global fuel and commodity prices. - May 15, 2026
