Kuala lumpur: Malaysia is expected to see a revival in its investment cycle in the second half of 2026 (2H 2026), supported by strong domestic demand despite the West Asia conflict, according to Affin Bank Bhd.

According to BERNAMA News Agency, Group Chief Economist Alan Tan Chew Leong noted that investment is likely to pick up alongside resilient private consumption, which should help cushion any potential slowdown in exports following uncertainties stemming from the United States-Iran conflict. Tan stated that Malaysia's gross domestic product (GDP) growth is likely to remain in the range of 4.5 to 5 percent, while the government's fiscal position is expected to remain manageable. He made these remarks during a webinar that examined the global and Malaysian implications of the West Asia conflict.

Tan further explained that Malaysia is benefiting from higher oil prices, which are providing some support to the country's growth outlook. He highlighted that, based on sensitivity analysis, for every US$10 increase in oil prices, key macro indicators such as GDP growth, inflation, the current account, and fiscal balance show a positive response in Malaysia. However, Tan pointed out that while higher oil prices lead to increased government revenue, they also result in a higher subsidy bill, which could exert pressure on government finances in the coming months or even years.

Meanwhile, IPPFA Sdn Bhd Investment Strategy Director and Country Economist Mohd Sedek Jantan commented on the impact of heightened uncertainty on capital markets. He noted that although developed markets have reached new highs, this has led to shifts in capital flows. Emerging markets might seem to benefit, but in reality, investors are reallocating funds from equities into bonds and fixed income instruments due to uncertainty. Mohd Sedek also mentioned that the evolving situation poses challenges for monetary policy. If the conflict persists, central banks could face pressure about whether to raise interest rates or maintain current levels, with either decision potentially affecting growth.

Mohd Sedek warned that Malaysia and other Asian economies are already experiencing rising inflation. If oil prices reach US$100 per barrel, second-round effects could delay or even derail easing cycles for many central banks.