Kuala lumpur: Malaysia's gross domestic product (GDP) growth is expected to moderate to 4.2% this year, a decline from 5.2% in 2025, primarily driven by increasing domestic demand alongside resilient external demand.
According to BERNAMA News Agency, MBSB Investment Bank Bhd (MBSB IB) has highlighted concerns in its research note regarding the external trade outlook. Weaker global demand, compounded by elevated inflation, could dampen Malaysia's export momentum. Furthermore, ongoing energy price shocks and potential disruptions in trade flows in West Asia may strain global supply chains, increasing the risk of shortages in petroleum-related products.
Moreover, MBSB IB pointed out that tighter United States trade policies could further impact external demand. New tariffs on semiconductor products, if imposed, could pose significant challenges to Malaysia's electrical and electronics exports. On the domestic front, growth may be hindered by softer consumer and business sentiment, alongside rising price pressures, as companies are likely to pass on higher production costs to consumers.
The research note also observed that while domestic growth remains stable, the Malaysian ringgit continues to face challenges against a strong US dollar. The 'higher-for-longer' narrative regarding US interest rates has gained traction, increasing demand for dollar-denominated assets. Market players anticipate a higher probability of rate hikes due to renewed inflation concerns in the US, which could support the US dollar index in the short term as supply-side inflation pressures persist.
Looking forward, MBSB IB forecasts that the local currency will strengthen through 2026. The recent resilience of the ringgit reflects improved confidence in Malaysia's macroeconomic management and stronger economic fundamentals. However, this outlook for the ringgit to appreciate further faces challenges from a resurgent US dollar, with market participants increasingly pricing in a 'no-cut' scenario for this year, driven by persistent oil price shocks and escalating geopolitical tensions in West Asia. Currently, MBSB IB maintains its 2026-ringgit projection, anticipating the ringgit to average around RM3.92 and end the year towards RM3.85.