Malaysia's economic growth is expected to moderate to 3.8% in 2026, lower than the Finance Ministry's target of between 4.0 and 4.5%, due to slower export and investment growth.
The moderation is partly due to the diminishing impact of forward-loaded exports to the United States in 2025, as well as economic slowdowns in key trading partners.
However, domestic demand remains resilient, supported by stable consumer spending, growth in the services sector and a strong labour market.
The electrical and electronics (E&E) sector is expected to remain resilient in line with the positive outlook for the global semiconductor industry, despite the uncertainties.
At the same time, small and medium-sized enterprises (SMEs) are facing increasing cost pressures such as the full implementation of e-Invoicing, mandatory Employees Provident Fund (EPF) contributions for foreign workers, a tiered levy on foreign workers, and rising utility costs and sales and services tax have prompted some industry players to plan price adjustments.
Although growth is expected to slow in 2026, the medium-term outlook remains positive. The implementation of structural reforms, continued investment and a more supportive monetary policy are expected to help the Malaysian economy return to stronger growth in the years ahead.
