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3 Sep 2026
The latest indicators point to resilient global growth, supported by strong global tech expansion, improving supply conditions and stable labour markets. Inflation has edged lower in recent months but is expected to remain elevated given the lagged pass-through of energy costs to consumer prices. Going forward, while uncertainties surrounding the Middle East conflict will continue to weigh on global growth amid continued inflationary pressures, the impact is expected to be cushioned by sustained tech-related spending. Downside risks to global growth remain, stemming from prolonged geopolitical tensions, tighter global financial conditions and concerns over valuations in financial markets. Upside potential includes stronger tech spending, faster-than-expected recovery in supply chain conditions and pro-growth policy measures in key economies.
The Malaysian economy expanded robustly by 5.7% in the first half of 2026, despite the challenging global environment. Growth was driven by stronger-than-expected export performance amid sustained domestic demand. The solid growth momentum is expected to bring 2026 growth to around 5%, and the economy’s sound fundamentals are expected to keep growth resilient in 2027. This will be driven by the external sector, which will be lifted by improved global prospects and robust demand for electrical and electronics (E&E) goods, as well as continued strength in tech-related non-E&E exports and sustained tourist spending. Stable labour market conditions and ongoing investment activity will remain supportive of domestic demand. This growth outlook remains subject to downside risks from a prolonged conflict in the Middle East and lower commodity production. Upside potential to growth could arise from better-than-expected global growth, stronger technology-related export demand and higher tourism activity.
Headline and core inflation in the first seven months of the year averaged 1.8% and 2% respectively. Despite elevated costs and strong economic growth, the pass-through to consumer prices has been contained by domestic policy measures and stable demand conditions amid limited spillover of external sector strength to wages. Developments surrounding the Middle East conflict remain uncertain, as elevated global commodity prices continue to exert upward pressure on cost conditions. As these developments remain fluid, the MPC will remain vigilant to cost pressures and domestic demand conditions given their impact on the inflation outlook.
At the current OPR level, the MPC considers the monetary policy stance to be consistent with the outlook of continued price stability and sustainable economic growth. The MPC will remain vigilant to ongoing developments and assess the balance of risks surrounding the outlook for domestic inflation and growth.
3 September 2026
© Bank Negara Malaysia, 2026. All rights reserved.
Source: Bank Negara Malaysia
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