Kuala lumpur: Malaysia's economy is anticipated to maintain its resilience in 2026, bolstered by ongoing foreign direct investment (FDI) and strong infrastructure investments, as stated by HSBC chief Asia economist Frederic Neumann. Neumann highlighted that the nation's gross domestic product (GDP) grew by 4.9 percent in 2025, closely aligning with the bank's expectation of around 5.0 percent, indicating underlying economic strength despite global challenges.

According to BERNAMA News Agency, Neumann expressed confidence in Malaysia's growth prospects during a virtual media briefing on HSBC Asian Outlook 2026. He projected a growth rate of 4.5 percent for Malaysia this year, acknowledging a slight decrease from the previous year's approximately five percent. This resilience is attributed to sustained investments in Malaysia, particularly in the electronics, semiconductors, and data centers sectors, which are enhancing the country's productive capacity and supporting medium-term growth.

Neumann emphasized Malaysia's competitiveness, especially in the electronics sector and semiconductor supply chain, benefiting from increased demand related to artificial intelligence (AI). He expressed optimism about FDI inflows to Malaysia, which should remain robust, painting a positive outlook for the nation.

HSBC has adjusted its inflation forecast slightly, projecting headline inflation at 1.4 percent for 2025 while maintaining the 2026 projection at 1.7 percent. Herald van der Linde, head of equity strategy for Asia-Pacific, expressed moderate optimism regarding Malaysia's equity market. He noted that Malaysia's market offers a combination of defensive characteristics and moderate growth potential, positioning it favorably among Asian equity markets.

Interest rates, remaining relatively high globally, are seen as beneficial for banks, including those in Malaysia. Van der Linde highlighted Malaysia as one of the most defensive markets in Asia, attracting local purchases and limiting downside risk.

Joey Chew, head of Asia FX Research, predicted that the ringgit would remain supported this year, although gains may be more gradual compared to 2025. She attributed the ringgit's strong performance last year to government policies encouraging government-linked companies (GLCs) to repatriate their dollar proceeds. Chew also noted a significant increase in foreign direct investment, particularly in data center developments, as a factor supporting the ringgit.

Chew cautioned that the ringgit could face challenges this year, including broad dollar trends and the United States-Malaysia trade deal, necessitating increased imports from the US and investments there. HSBC Global Investment Research anticipates the ringgit reaching 4.10 against the US dollar by the end of 2026.

In terms of global monetary policy, Neumann stated that HSBC does not foresee the US Federal Reserve (Fed) cutting interest rates. He projected the US economy to grow by 2.3 percent in 2026, up from 2.2 percent the previous year, driven by factors such as tax cuts, AI advancements, and high equity prices. Neumann concluded that the Fed may lack major macroeconomic justifications for aggressive rate cuts this year.