Accra:The country's economy is projected to grow by 4.7% in the third quarter of 2026, driven by domestic consumption, investment, and manufacturing activity, as reported by TA Securities.
According to BERNAMA News Agency, Shazma Juliana Abu Bakar, the chief economist at TA Securities, noted that the expected moderation from the second quarter's 6.0% growth is part of a gradual normalization following a robust first half of the year. She emphasized that growth above 4.5% remains healthy, indicating a shift to a more moderate expansion rather than a contraction.
Shazma Juliana is confident in the full-year GDP growth forecast of 5.1%, with an anticipated fourth-quarter growth of 4.6%. She highlighted that industrial activity might slow, particularly in the mining sector, as domestic spending aligns with more sustainable levels. Despite a slight dip in the September manufacturing Purchasing Managers' Index to 49.9, this does not necessarily imply a significant downturn.
Domestic demand continues to act as a crucial buffer for Malaysia's economy, while manufacturing and trade remain vital growth drivers, even as they moderate from previous high rates. Key external risks include reduced demand from major trading partners such as the United States, Singapore, and China, and the performance of exports will be influenced by semiconductor demand and growth in alternative markets. A distinction between gross exports and their actual GDP contribution is important, as manufacturing relies on imported inputs.
On the fiscal front, Shazma Juliana pointed out that a modest economic slowdown might not affect Budget 2027's revenue targets, as government revenue depends on factors beyond GDP growth, such as corporate profits, household incomes, commodity prices, and tax collection efficiency. The government aims for revenue of RM380.8 billion in 2027, up from RM363.6 billion in 2026.
Regarding monetary policy, TA Securities expects Bank Negara Malaysia to maintain the Overnight Policy Rate at 2.75% at its November meeting. A moderation in growth and manageable inflation are seen as supportive of keeping the policy rate unchanged. A softer GDP reading alone may not warrant a rate cut, as the central bank needs to determine if the economic weakness is persistent and widespread across domestic demand and employment.