Growth Set to Moderate in 2H26 as Risks Build; OPR on Hold

Despite the strong first-half showing, full-year 2026 GDP growth is still forecast at 5.0%, implying a slowdown to around 4.4% in the second half. The moderation reflects a high base from the previous year and rising headwinds from Middle East tensions, which are shifting from supply disruptions to persistent cost pressures.

Growth

Producer prices have already climbed to a four-year high, and earlier front-loading of inventories appears to be fading. Key external risks include a sharper re-escalation of regional tensions and unfavourable US trade policies that could hit global trade flows.

Bank Negara Malaysia is expected to keep the Overnight Policy Rate unchanged at 2.75% through 2026. While stronger growth has raised the possibility of a hike, policymakers are likely to adopt a wait-and-see stance as second-half risks become clearer.

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