Economic growth eases in the first quarter of 2026

GDP growth moderates in the first quarter of the year: According to an advance estimate, Malaysia's GDP grew 5.3% on a year-on-year basis in Q1, following 6.3% growth in the previous quarter, which had marked a three-year high. The figure was slightly weaker than economists had projected.

Broad-based slowdown weighs on economic growth: Compared with the prior quarter's data, readings in Q1 softened for the agricultural sector (+2.8% on a year-on-year basis vs +5.4% in Q4), the manufacturing sector (+5.8% vs +6.1% in Q4), the mining and quarrying sector (-1.1% vs +2.0% in Q4), the construction sector (+7.8% vs +11.0% in Q4) and the services sector (+5.4% vs +6.3% in Q4). The mining and quarrying sector was dragged down by lower crude oil and natural gas output. An operations halt at Malaysia's largest petrochemicals complex in early March, linked to tighter crude supply from the U.S.-Iran war, added further pressure on the industrial sector. That said, strong AI-related demand continued to support manufacturing, with electrical and electronic products posting output growth.

Panelist insight: Commenting on the impact of the Iran war on Malaysia’s economic outlook, United Overseas Bank’s Julia Goh and Loke Siew Ting said: “Risks to Malaysia’s growth outlook are rising via higher energy costs, supply-chain disruptions, and softer sentiment, with labour market effects likely to surface from 2Q26. The government is responding with targeted measures including higher diesel cash aid, review of targeted subsidies, an increase in the biodiesel mandate, and efforts to secure fuel supply. Malaysia remains relatively cushioned, but prolonged disruptions could pressure inflation through fuel, electricity, and secondary channels.”

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