Malaysia’s economy is projected to grow between 4.8% and 5.3% in 2026, exceeding the government’s earlier forecast of 4% to 4.5%, before moderating to between 4.2% and 5.2% in 2027.
According to the Finance Ministry’s Economic Outlook 2027 report, the economy expanded by 5.7% in the first half of 2026 and is expected to grow by 4.7% in the second half.
The report said domestic demand would remain the main driver of economic growth, supported by private consumption, a firm labour market and continued income growth.
Domestic demand supported by government aid
Household spending is expected to remain resilient, supported by government measures to sustain purchasing power, including Sumbangan Asas Rahmah (SARA), Sumbangan Tunai Rahmah (STR) and the expansion of the Payung Rahmah (PJRM) initiative.
‘Household consumption continues to be supported by government measures to sustain purchasing power through SARA and STR, as well as the expansion of the PJRM,’ the report said.
The continuation of the BUDI95 and targeted BUDI Diesel subsidy programmes is also expected to cushion households against energy price shocks and inflationary pressures.
Services and manufacturing to drive growth
On the supply side, the services sector is expected to remain the main contributor to economic growth, supported by tourism, retail and transport activities linked to Visit Malaysia 2026-2027.
The manufacturing sector is also expected to benefit from the technology upcycle and the expansion of high-value activities, particularly in the semiconductor and electrical and electronics industries.
External risks remain
Despite the improved growth outlook, the Finance Ministry cautioned that economic prospects remained subject to external risks.
These include geopolitical tensions, changes in international trade policies and volatility in global financial markets, the report said.
