TMR

KUALA LUMPUR — Malaysia’s near-term policy priorities should focus on preserving macroeconomic stability while safeguarding critical buffers amidst the global supply shock due to the West Asia conflict. 

In a box article in Bank Negara Malaysia’s (BNM) quarterly bulletin, the central bank said the immediate priority is to secure essential supplies and prolong the use of existing buffers, such as fuel inventories and critical inputs, to cushion the supply shock.

“Policy responses should remain prudent, targeted and proportionate, focusing on managing cost pressures and preventing disorderly price adjustments while protecting the most affected segments of the economy. 

“In addition to the continuation of targeted subsidy measures, BNM has also introduced SME Stabilisation Relief Facility (SME SRF), a RM5 billion financing facility to support viable SMEs affected by the conflict,” it said. 

BNM Governor Abdul Rasheed Ghaffour (picture) said targeted efforts by the government, financial institutions, businesses and households would be crucial in helping the country weather the ongoing shocks.

“We need to look into targeted measures that need to be given to the affected sectors as well. By doing so, we will be able to sustain our growth projection.

“Everyone has a role to play. The government will step in to ensure adequate supply and assistance for affected families, while banks can also help by providing some kind of assistance to those affected,” he told a press conference after announcing Malaysia’s gross domestic product (GDP) performance for the first quarter of 2026.

Together with credit guarantee schemes and ongoing financing support, these measures help cushion near-term cash flow pressures and ensure continued access to working capital, said BNM.

At the same time, preserving monetary and financial stability remains essential as the Monetary Policy Committee (MPC) acknowledges the uncertainties from the ongoing conflict in the Middle East.

It said the impact on the global and Malaysian economies will depend on how the situation unfolds.

“At the current Overnight Policy Rate (OPR) level, the MPC considers the monetary policy stance to be appropriate and consistent with the outlook of continued price stability and sustainable economic growth.

“The MPC will remain vigilant to ongoing developments and assess the balance of risks surrounding the outlook for domestic inflation and growth,” it said. 

Additionally, BNM noted that strengthening national food and energy security, diversifying import sources, and enhancing domestic supply capacity are critical to reducing vulnerability to external shocks. 

Efforts to deepen regional and alternative trade linkages, as well as accelerate the transition to renewable energy and the green economy, could help mitigate supply chain disruptions and reduce reliance on fossil fuels and global energy price volatility.

In conclusion, Malaysia, as a small and open economy, is not fully insulated from these developments, it said. 

Ultimately, the magnitude of the macroeconomic impact will depend on the persistence and severity of the conflict, as well as the effectiveness of policy responses and firm-level adjustments in mitigating spillovers to the real economy.

“Policy efforts remain focused on preserving macroeconomic and financial stability. This includes ensuring orderly financial conditions, supporting affected households and firms through targeted measures, and safeguarding domestic supply conditions. 

“Continued vigilance and policy flexibility will therefore be critical to contain second-round effects arising from higher costs, trade disruptions, and shifts in financial market sentiment amid an uncertain global environment,” added BNM.  — BERNAMA

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KUALA LUMPUR — Malaysia’s headline inflation increased to 1.6 per cent in the first quarter of 2026 (1Q 2026) from 1.3 per cent in 4Q 2025, while core inflation moderated to 2.1 per cent from 2.3 per cent previously, said Bank Negara Malaysia (BNM).  

The central bank said the higher headline inflation reflected some initial cost pass-through of higher global cost pressures, partly due to the conflict in West Asia.

“Electricity charges and fuel prices, mainly RON97 and diesel, increased during the quarter, which led to slower declines in electricity (-6 per cent; 4Q 2025: -10.3 per cent) and fuel inflation (-1.5 per cent; 4Q 2025: -1.9 per cent),” it said in a statement today.

However, BNM said these increases were partly offset by lower core inflation, mainly reflecting softer inflation in food away from home (2.4 per cent; 4Q 2025: 2.8 per cent) and rental inflation (1.6 per cent; 4Q 2025: 1.9 per cent).

“Inflation pervasiveness, measured by the share of Consumer Price Index items registering monthly price increases, continued to decline to 38.3 per cent during the quarter (4Q 2025: 39.6 per cent), trending well below the historical first quarter average of 52.2 per cent,” it added.

On the inflation outlook for the year, BNM said that the 2026 headline inflation is projected to average between 1.5 per cent and 2.5 per cent this year.

“Following the West Asia conflict, inflation is expected to edge higher due to elevated global energy and other key commodity prices, broadly in line with expectations.

“In the absence of excessive demand pressures, existing policy measures — including targeted fuel subsidies and other mitigation measures — are expected to help limit near-term spillovers to broader inflation,” it said.

BNM added that the extent and pace of pass-through to domestic prices from the ongoing conflict will also depend on firms’ pricing behaviour and demand conditions. — BERNAMA

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KUALA LUMPUR — Malaysia’s economy expanded by 5.4 per cent in the first quarter of 2026 (1Q 2026), surpassing the advance estimate of 5.3 per cent with robust domestic demand, investment activities and export continued to drive growth, according to Bank Negara Malaysia (BNM).

Growth, however, moderated from the 6.2 per cent recorded in the fourth quarter of 2025.

BNM said household spending remained resilient amid favourable labour market conditions and continued policy support, while investment activity was sustained by machinery and equipment spending, structures investment and the implementation of multi-year projects.

Private consumption expanded 4.7 per cent in 1Q 2026, while private investment grew 7.8 per cent. Net exports surged 13.5 per cent amid steady export growth and a faster moderation in imports.

On the supply side, the services sector grew 5.6 per cent (Q4 2025: 6.2 per cent), supported by business-related and government services, while the manufacturing sector expanded 5.9 per cent (Q4 2025: 6 per cent) on stronger E&E production driven by continued demand for AI-related components.

The agriculture sector recorded slower growth of 2.6 per cent (Q4 2026: 5.7 per cent) as palm oil production normalised following strong yields previously, while the mining and quarrying sector contracted 2.1 per cent (Q4 2025: 1.4 per cent) due to weaker domestic oil and gas production.

Construction growth moderated to 7.7 per cent from 10.9 per cent previously amid slower residential and civil engineering activities, although special trade and non-residential activities continued to provide support.

BNM also said Malaysia recorded a wider current account surplus of RM15.2 billion in 1Q 2026, compared with RM2.7 billion in the previous quarter, driven by a larger goods surplus and higher services surplus supported by travel and ICT receipts.

Meanwhile, foreign direct investment (FDI) inflows remained sustained at RM22.8 billion, mainly channelled into the ICT and professional, scientific and technical activities sub-sectors. 

In a separate statement, BNM said that investment growth was supported by the continued implementation of multi-year projects by both the private and public sectors, a high realisation rate of approved investments as well as the ongoing rollout of national master plans.

BNM said export growth remained strong, driven mainly by continued expansion in electrical and electronics (E&E) exports.

“Meanwhile, gross import growth moderated amid slower growth in capital, intermediate and consumer goods imports,” it said. 

It further said growth in the services sector moderated, reflecting slower motor vehicle sales following the front-loading of purchases in the fourth quarter ahead of the expiration of import duty waivers for electric vehicles.

“Meanwhile, the manufacturing sector performance remained supported by stronger E&E performance, in line with continued demand for artificial intelligence and data centre-related components,” BNM said. 

Besides that, growth in the agriculture sector was lower amid normalisation in palm oil production following high output previously and ongoing replanting activities, it said. 

“The mining and quarrying sector contracted, mainly due to weaker oil and gas production. In addition, growth in the construction sector normalised from a double-digit growth amid a moderation in residential construction and civil engineering activities,” it said. 

BNM said that on a quarter-on-quarter seasonally adjusted basis, the economy contracted by 0.01 per cent compared with 1.4 per cent growth in the fourth quarter of 2025, following the strong performance recorded in the preceding quarter.

Meanwhile, BNM Governor Datuk Seri Abdul Rasheed Ghaffour said Malaysia is expected to face external headwinds stemming from the ongoing geopolitical conflict in West Asia.

“As a small and open economy, Malaysia will inevitably face both direct and indirect impacts from the ongoing geopolitical conflict in West Asia.

“Higher energy prices, supply chain disruptions, and heightened uncertainty are expected to weigh on the external environment,” he said.

Nevertheless, Abdul Rasheed said the Malaysian economy is expected to remain resilient in 2026, with growth projected at between four per cent and five per cent, supported by steady domestic demand and continued export expansion.

He said resilient domestic demand would continue to provide a strong buffer against external headwinds.

“Household spending will be underpinned by firm labour market conditions and continuous policy support. Investment activity will be driven by the continued progress of multi-year projects in both the private and public sectors, as well as the ongoing implementation of national master plans,” he said. 

Despite external challenges, Abdul Rasheed said export growth would continue to benefit from the global technology expansion, particularly for E&E goods, reflecting Malaysia’s role in global value chains. — BERNAMA  

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