Malaysia’s GDP held firm at +5.4% YoY in 1Q26 (4Q25: +6.2%), above the advance estimate of +5.3%, supported by a rebound in net exports.
The current account recorded a surplus of 3.0% of GDP (4Q25: 0.5%), supported by goods and services surpluses. We maintain our current account surplus projection at 1.5% of GDP in 2026.
We maintain our 2026 GDP growth forecast at +4.7% YoY, with near-term supply disruption risks remaining manageable for now.
Risks are increasingly tilted to the downside in 2H26, particularly if the Middle East conflict prolongs into 3Q26, with spillovers to Malaysia’s domestic demand.
1Q26 growth momentum holds up well
Malaysia’s GDP held firm at +5.4% YoY in 1Q26 (4Q25: +6.2%), coming in slightly higher than the advance estimate of +5.3%. However, on a seasonally adjusted basis, growth contracted marginally (-0.01% QoQ; 4Q25: +1.4%), marking the first sequential decline since 4Q22 and suggesting some moderation in the underlying growth momentum.
Net exports offset easing domestic demand
Domestic demand moderated but remained broadly resilient, contributing +5.0ppts to headline GDP growth (4Q25: +6.2ppts). Private consumption stayed firm (+4.7% YoY; 4Q25: +5.6%), underpinned by a resilient labour market with unemployment improving to 2.9% in 1Q26, alongside continued income-related policy support. While public investment slowed (+5.3%; 4Q25: +9.5%) amid the near completion of selected infrastructure projects, private investment remained steady (+7.8%; 4Q25: +9.2%) on continued machinery and equipment spending.
Externally, real exports remained firm (+5.2% YoY; 4Q25: +6.3%) on steady E&E shipments, travel and ICT services. Meanwhile, imports moderated (+4.6%; 4Q25: +9.0%), reflecting slower capital, intermediate and consumption goods imports. As a result, net exports rebounded sharply (+13.5%; 4Q25: -32.9%), contributing +0.6ppts to GDP growth (4Q25: -1.4ppts).
On a sectoral basis, services and manufacturing remained the key growth anchors. Services moderated to +5.6% YoY (4Q25: +6.2%), partly due to softer motor vehicle sales following the expiry of import duty waivers for electric vehicles. Nonetheless, retail trade remained firm (+4.7%; 4Q25: +4.6%), underscoring resilient consumer spending. Manufacturing held up well (+5.9%; 4Q25: +6.0%) amid firmer E&E production and sustained demand for AI and data centre-related components. Agriculture eased to +2.6% (4Q25: +5.7%) as palm oil output normalised, while mining contracted (-2.1%; 4Q25: +1.4%) on lower oil and gas production.
Current account surplus widens
The current account recorded a larger surplus of +RM15.2bn in 1Q26 (4Q25: +RM2.7bn), equivalent to 3.0% of GDP (4Q25: 0.5%), supported by a wider goods account surplus of +RM33.6bn (4Q25: +RM24.3bn) amid slower imports. Meanwhile, the services account registered a surplus of +RM6.4bn (4Q25: +RM5.3bn) for the third consecutive quarter, underpinned by sustained tourism receipts and ICT-related services. Looking ahead, structural demand for E&E and data centre-related services should continue to support the current account, although rising external uncertainties may cap further upside. We maintain our current account surplus projection at 1.5% of GDP in 2026 (2025: 1.6%).
Growth outlook remains supported for now
We maintain our 2026 GDP growth forecast at +4.7% YoY, which remains achievable under current conditions. Following the stronger-than-expected 1Q26 GDP print, growth should remain relatively firm in 2Q26, supported by resilient E&E and ICT service exports alongside steady domestic demand. Private consumption should continue to anchor growth amid resilient labour market conditions and contained inflation.
While we remain vigilant over the Middle East conflict and ongoing supply chain disruptions, near-term supply disruption risks remain manageable for now. Notably, Malaysia’s April manufacturing PMI pointed to a ramp-up in production activities, with manufacturers stepping up stockpiling efforts (refer to our Malaysia IPI report). According to BNM, firms are holding an average of three to four months of inventory, which should help sustain production and cushion against rising costs. Other mitigation measures adopted by firms include sourcing inputs from alternative suppliers and diversifying export markets.
We believe effective policy support will be another key determinant in mitigating the impact of the current supply disruptions. The government is working to secure fuel supply beyond June and is expected to announce an oil supply continuity plan, which should help alleviate concerns over domestic fuel security. More importantly, BNM has introduced the RM5bn SME Stabilisation Relief Facility to provide working capital support and repayment assistance, particularly for SMEs affected by supply disruptions.
Risks increasingly tilted to the downside
Nonetheless, risks are increasingly tilted to the downside in 2H26, particularly if the Middle East conflict prolongs into 3Q26, with spillovers to Malaysia’s domestic demand. Key areas under our watch include: i) whether industrial input disruption and eventual inventory depletion begin to weigh on industrial activity; ii) whether rising material costs and potential domestic fuel policy adjustments lift inflation materially above expectations (in-house: 2.1%; BNM: 1.5-2.5%), thereby weighing on consumer spending; iii) signs of weakening consumer sentiment, including softer retail trade activity; and iv) whether prolonged supply disruptions eventually lead to broader labour market weakness and rising unemployment.
Such scenarios could warrant a downward revision to our growth forecast, with GDP growth potentially moderating towards +4.0%, the lower end of BNM’s official 4.0–5.0% projection range.
Disclaimer
The report is for internal and private circulation only and shall not be reproduced either in part or otherwise without the prior written consent of Apex Securities Berhad. The opinions and information contained herein are based on available data believed to be reliable. It is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered by this report.
Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of Apex Securities Berhad and are subject to change without notice. Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.
Apex Securities Berhad does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against Apex Securities Berhad. Apex Securities Berhad may from time to time have an interest in the company mentioned by this report. This report may not be reproduced, copied or circulated without the prior written approval of Apex Securities Berhad.
| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 3.941293 | 3.969002 |
| EUR | 4.596428 | 4.601179 |
| CNY | 0.580348 | 0.580971 |
| HKD | 0.503377 | 0.506936 |
| SGD | 3.079022 | 3.100895 |