The Malaysian economy grew by 5.3% year on year in Q1 2026 based on advance estimates, showing the economy is still growing, though at a slower pace than in the previous quarter. The latest figures represent a slowdown in relation to a 6.3% expansion in Q4 2025, which represents the strongest quarterly growth seen in the last three years. This slowdown indicates that whilst economic activity is holding up, some parts of the economy are coming under strain. Steady growth in areas like the services, manufacturing, and construction industries was a boost to the Q1 economy. They are areas that have been powering the Malaysian economy on the back of domestic spending and investment, and improving external trade conditions.
However, a slump in the mining and quarrying sector dragged on overall growth, which has been down by 1.1% largely on the back of falling output in the areas of crude oil and natural gas, which put downward pressure on the economy. Despite this slight moderation, officials believe that the economy is inherently still strong. Household consumption is steady as both employment and income grow consistently, while exports are being sustained by robust demand from Malaysia’s largest trading partners. Tourism also helped boost the economy, as continued international travel returns, which in turn helps the services and hotel sector and compensates for any lack of activity in other sectors.
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Global risks, such as continuing geopolitical tension, particularly in the Middle East, have forced oil prices up, leading to some global economic uncertainty, which has implications for inflation and growth going forward. The first signs of inflationary pressure are beginning to appear as consumer prices rose 1.7% in March, up from 1.4% in February, due to rising global input costs. The Malaysian central bank currently has a growth forecast for 2026 within the range of 4 to 5%, suggesting growth will remain somewhat subdued. Final Q1 GDP will be released in the middle of May.
