Kuala lumpur: Public Investment Bank Bhd (PIVB) has maintained its 2026 gross domestic product growth forecast at 4.6 per cent year-on-year (y-o-y), with domestic demand still anchoring the expansion.
According to BERNAMA News Agency, the investment bank stated that the first quarter of 2026 (1Q 2026) results align with its expectations, although the growth momentum has normalized. The GDP growth rate eased to 5.4 per cent y-o-y from 6.2 per cent y-o-y in the fourth quarter of 2025 and remained broadly flat on a seasonally adjusted quarter-on-quarter basis.
The bank noted that while this does not indicate a break in the growth cycle, the buffer against external shocks has diminished. This observation followed Bank Negara Malaysia's (BNM) announcement that Malaysia's economy expanded by 5.4 per cent y-o-y in 1Q 2026. The central bank expects Malaysia's growth to range between 4.0 per cent and 5.0 per cent y-o-y in 2026, driven by resilient domestic demand and continued export growth, despite exposure to external uncertainties.
PIVB highlighted a shift in risk from oil prices to supply continuity, with the West Asia conflict causing input-cost and supply-chain shocks. This situation is creating pressure across sectors such as fuel, fertilizers, petrochemicals, logistics, and other petroleum-based materials. The Prime Minister's economic adviser cautioned that June could be a critical point as firms deplete inventories, potentially leading to reduced overtime, shift cuts, and production disruptions.
Despite these risks, PIVB believes there are sufficient offsets to maintain its forecast. Household spending is supported by low unemployment, wage growth, and targeted policy measures, while investment activity benefits from record approved-investment realization, data center-related capital expenditures, and expansion in electrical and electronics. Additionally, the momentum in the Johor-Singapore Special Economic Zone and public project execution contributes positively. The AI-led semiconductor cycle offers a selective external cushion through outputs in electronics, machinery demand, and ICT-related services, conditional on not extending supply constraints beyond inventory buffers.
Furthermore, PIVB has kept its overnight policy rate (OPR) call at 2.75 per cent throughout 2026. Any rate adjustment would require stronger evidence that cost pass-through is becoming broader, more persistent, and less manageable for firms.
Currently, inflation risks are elevated, but demand conditions remain moderate, and price pressures are uneven. Consequently, BNM is expected to maintain its rate while preserving the option for adjustments if needed.