UOB economists Julia Goh and Loke Siew Ting note Malaysia’s 4Q25 GDP grew 6.3% year-on-year, the fastest since 4Q22, lifting full-year 2025 growth to 5.2%. They project real GDP growth to slow to 4.5% in 2026 as base effects and external uncertainties weigh, though domestic demand, investment, tourism and AI-related activity are expected to keep overall expansion solid.
Domestic demand cushions slower 2026 GDP
“Going forward, we expect real GDP growth to moderate to 4.5% in 2026 (from 5.2% in 2025, MOF est: 4.0%-4.5%) amid persistent external uncertainties and base effects.”
“Domestic demand should remain the key anchor, supported by continued government policy measures, the rollout of catalytic initiatives under national master plans, the realisation of high approved investments, stronger tourism flows in conjunction with Visit Malaysia Year 2026, and ongoing momentum from the AI boom.”
“For the entire year of 2025, the current account surplus rose to MYR31.8bn or 1.6% of GDP (2024: +MYR27.7bn or 1.4%). Backed by an expected improvement in tourist activities, modest goods export growth, and continued ICT-related services exports, we project the current account surplus to reach MYR38.0bn or 1.8% of GDP in 2026 (MOF est: +MYR23.2bn or 1.1%).”
“Externally, geopolitical risks have resurfaced while US President Trump revived targeted tariff measures in mid-Jan, announcing a 25% tariff on countries doing business with Iran (on 12 Jan) and a 25% levy on certain advanced computing chips (on 14 Jan). Although the US Supreme Court has postponed its ruling, the one-year pause in US–China tariff escalation until Nov 2026 provides temporary stability and supports ongoing supply-chain diversification.”
“This is expected to continuously offer uneven but positive spillovers to Malaysia’s trade outlook.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Source: https://www.fxstreet.com/news/malaysia-growth-seen-moderating-in-2026-uob-202602132106
