Malaysia’s Economy Expands 5.4 Per Cent Despite Global Uncertainty and West Asia Conflict
PETALING JAYA: Malaysia’s economy continued to outperform expectations in the first quarter of 2026, recording stronger-than-anticipated growth despite ongoing geopolitical tensions and prolonged conflict in West Asia that continue to weigh on the global economy.
Prime Minister Anwar Ibrahim said Malaysia’s Gross Domestic Product (GDP) expanded by 5.4 per cent during the first quarter of the year, exceeding both the preliminary estimate by Jabatan Perangkaan Malaysia and Bloomberg’s median projection of 5.3 per cent.
According to him, the stronger performance demonstrated the resilience of Malaysia’s economy even as the international environment remained highly uncertain due to geopolitical instability, energy market volatility and supply chain disruptions.
He said domestic demand and the country’s external sector continued to support economic expansion during the quarter.
“Domestic demand grew by 5.2 per cent, supported by stable household spending driven by a strong labour market and higher disposable income,” he said in a statement today.
Anwar explained that improved household income was partly supported by the second phase of the Public Service Remuneration System (SSPA), special financial assistance for civil servants and continued support under the Sumbangan Asas Rahmah programme.
The Prime Minister, who also serves as Finance Minister, said investor confidence in Malaysia remained strong, particularly in sectors related to artificial intelligence (AI) and data centre investments.
He noted that Malaysia’s investment climate continues to benefit from pro-growth government policies and efforts to strengthen the country’s digital economy ecosystem.
“Investments in AI technology and data centres remain strong due to facilitative policies and a conducive investment environment,” he said.
According to Anwar, the country’s economic momentum has also been reinforced by ongoing reforms introduced under the Madani Economy framework, which focuses on fiscal discipline, responsible governance and people-centric economic policies.
He said these reforms allowed Malaysia to sustain economic growth after recording 5.2 per cent growth in both 2024 and 2025 before improving further to 5.4 per cent in the first quarter of this year.
At the same time, he stressed that prudent fiscal management had enabled the government to cushion the impact of rising global fuel prices on households and businesses.
Measures introduced include targeted fuel subsidy assistance through BUDI MADANI for RON95 petrol as well as enhanced support under the Budi Diesel programme.
According to him, these initiatives helped sustain domestic spending and overall economic activity despite external pressures.
Malaysia’s labour market also continued to strengthen, with the unemployment rate falling to 2.9 per cent, the lowest level recorded in a decade.
Inflation meanwhile remained moderate at 1.6 per cent throughout the quarter.
Anwar also pointed to the strengthening ringgit, which has emerged as one of Asia’s better-performing currencies, as evidence of growing investor confidence in Malaysia’s economic fundamentals.
He said the stronger performance of the FTSE Bursa Malaysia KLCI and net foreign direct investment inflows amounting to RM22.8 billion during the first quarter further reflected positive investor sentiment towards the country.
However, the Prime Minister warned that the government remains cautious about the risks posed by the continuing conflict in West Asia, particularly its impact on global demand, supply chains and market stability.
He said prolonged geopolitical tensions could disrupt international supply networks further while increasing energy, logistics and production costs globally.
“If the conflict continues for an extended period, it could contribute to higher inflationary pressures, weaken domestic demand and increase operating costs for businesses,” he said.
To address emerging risks, Majlis Tindakan Ekonomi Negara has established a crisis management task force to monitor developments and coordinate real-time responses to new economic threats.
Meanwhile, the government has also allocated RM15 billion in financing support for micro, small and medium enterprises (MSMEs) through microfinancing schemes, business loans and guarantee facilities.
Anwar said targeted fuel subsidy reforms and continued assistance through BUDI95 and Budi Diesel are intended to reduce the impact of rising global energy prices on eligible households and businesses while supporting broader economic stability.
He added that the measures are also expected to improve subsidy efficiency, reduce fiscal leakages and strengthen enforcement against fuel smuggling activities.
“Our immediate priority is to safeguard economic stability and minimise the external impact of this crisis on the rakyat while continuing Madani Economy reforms to ensure economic growth translates into meaningful benefits for the people,” he said.
-wilayah.com.my
