Australia & New Zealand Banking Group (ANZ) in its statement said Malaysia's economic growth is expected to slow further in 2026 due to weak global demand and external pressure on exports.
ANZ also expects Malaysia's annual GDP to grow 4.3% in 2025, in line with Bank Negara Malaysia's revised forecast of around 4.0% to 4.8%, before slowing to 4.2% in 2026.
In the first half of 2025, Malaysia's economy grew by 4.4%.
The bank stressed that declining global demand, the impact of new tariffs and moderate global growth were the main factors weighing on performance.
They explained in the 4Q2025 Asian Economic Outlook report that declining global demand, the impact of new tariffs and moderate global growth were the main factors weighing on performance.
Malaysia's exports continue to face challenges, particularly in the electrical and electronics (E&E) sector, as producer prices fall and demand from the US fades. Intermediate goods imports, which shrank in July and August, also signaled additional weakness.
In terms of domestic consumption, which contributes around 60% to GDP, growth remains below pre-pandemic levels. It expanded by just 5.2% in the first half of 2025, compared to 6.9% before Covid-19, despite low unemployment and rising labour force participation.
ANZ explained that this weakness stems from over 60% of new jobs over the past three years being in low-skilled and semi-skilled jobs, thus depressing wage growth and purchasing power.
Government initiatives such as the RM100 one-off cash transfer and basic goods subsidies are expected to have only a modest impact on household spending.
In terms of inflation, ANZ expects price pressures to remain contained at an average of 1.6% in 2025 before rising to 2.5% in 2026, driven by a small SST tax expansion and a decline in petrol prices, which has a modest downward impact.
For the Asian region, the country's GDP is expected to grow 4.9% in 2025, up from 4.1% previously, before moderating to 4.7% in 2026.
