GDP Growth Eased to +5.4%yoy, Still Driven by Resilient Domestic Demand

Malaysia’s GDP growth moderated to +5.4%yoy in the 1QCY26 (4QCY26: +6.2%yoy), marginally higher than the advance estimate (+5.3%yoy) as well as market and our expectations. The moderation was seen across all sectors and type of expenditures, but domestic demand remained the major contributor to economic growth.

On the demand side, private consumption grew slower at +4.6%yoy (4QCY25: +5.8%yoy) and government spending also increased moderately at +4.1%yoy (4QCY25: +9.3%yoy). The expansion in gross fixed capital formation also eased to +7.3%yoy (4QCY25: +9.3%yoy), but still points to encouraging investment activities.

GDP growth

On the supply side, services growth slowed to +5.6%yoy (4QCY25: +6.2%yoy) and construction sector growth moderated further to +7.7%yoy (4QCY25: +10.9%yoy). Manufacturing sector experienced only a marginal easing to +5.9%yoy (4QCY25: +6.0%yoy). Meanwhile, growth for the agriculture sector slowed to +2.6%yoy (4QCY25: +5.7%yoy), while mining sector contracted by -2.1%yoy (4QCY25: +1.4 %yoy). 

“We maintain our projection for 2026 GDP growth to moderate to +4.2% (2025: +5.2%), as the near-term growth outlook could be constrained by downside risks such as higher inflation and possibility of weaker external demand. On the domestic front, growth prospects may be weighed down by weaker sentiment, higher inflation and supply disruptions,” MBSB says.

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