Economic growth hits three-year high in Q4

Quarterly and annual data revised upwards: According to a second release, Malaysia's GDP increased 6.3% on a year-on-year basis in Q4, following an upwardly revised 5.4% expansion in the prior quarter. Q4's reading was revised up from the flash estimate of 5.7% and marked the strongest since Q4 2022. On a seasonally adjusted quarter-on-quarter basis, the economy grew 0.8% in Q4, following a 2.7% expansion in the previous quarter. Full-year growth was also revised upwards: In 2025, the economy grew 5.2% (2024: +5.1%), higher than the preliminary estimate of 4.9% and marking a three-year high.

Domestic demand accelerates: Compared to the previous quarter's data, readings in Q4 improved for private consumption (+5.3% yoy vs +5.0% in Q3), government consumption (+8.0% vs +7.1% in Q3), fixed investment (+9.3% vs +7.4% in Q3), exports of goods and services (+3.9% vs +1.7% in Q3) and imports of goods and services (+7.9% vs +0.7% in Q3). In Q4, domestic demand was boosted by favorable labor market conditions, income-support measures and ongoing data center projects. Meanwhile, exports fared better due to stronger demand for electrical and electronic products amid the ongoing AI boom, as well as resilient inbound tourism, which supported services exports. However, overall net exports detracted from GDP growth.

Domestic demand and exports to decelerate in 2026: Our panelists see Malaysia’s GDP growth at a three-year low in 2026, as both domestic demand and exports are forecast to lose steam. Nevertheless, fiscal stimulus and resilient demand for AI-related electronics should provide tailwinds to economic momentum. Additional U.S. tariffs on semiconductors are a key downside risk.

Panelist insight: Nomura’s Euben Paracuelles and Yiru Chen commented: “We maintain our 2026 GDP growth forecast of 5.2%, which is well-above the official forecast range of 4.0-4.5% and the consensus forecast of 4.4%. Our forecast is still underpinned by robust domestic demand. Strong investment spending is likely to be sustained, in our view, helped by the government’s implementation of structural reforms and infrastructure projects. […] Private consumption should hold up, in our view, helped by the resilient labour market and fiscal support measures. We also expect export growth to benefit from a sustained global tech uptrend (with a 6-8 month lead to exports) and broadening AI-related demand. Increasing tourist activity and ICT-related service exports will likely provide an additional boost.” United Overseas Bank’s Julia Goh and Loke Siew Ting said: “We expect real GDP growth to moderate to 4.5% in 2026 (from 5.2% in 2025, MOF est: 4.0%-4.5%) amid persistent external uncertainties and base effects. Domestic demand should remain the key anchor, supported by continued government policy measures, the rollout of catalytic initiatives under national master plans, the realisation of high approved investments, stronger tourism flows, and ongoing momentum from the AI boom.”

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