UOB’s Global Economics & Markets Research, led by Julia Goh and Loke Siew Ting, notes Malaysia’s 1Q26 Gross Domestic Product (GDP) grew 5.4% year-on-year, slightly above estimates but slower than 4Q25. Domestic demand and services remained key drivers, while external headwinds and the Middle East conflict are intensifying downside risks. UOB keeps its 2026 GDP growth forecast at 4.5% and expects Bank Negara Malaysia (BNM) to hold the Overnight Policy Rate at 2.75%.
Growth slows as risks intensify
“Although headline growth was robust in 1Q26, downside risks have intensified as the Middle East conflict enters its 11th week and the Strait of Hormuz remains effectively closed.”
“Pending greater clarity, we maintain our 2026 GDP growth forecast at 4.5% (BNM est: 4.0%–5.0%, 2025: 5.2%), with the central bank expected to keep the Overnight Policy Rate (OPR) unchanged at 2.75% until clearer shifts emerge in its growth and inflation outlook.”
“Thus, we expect BNM to await greater clarity over the next two to three months before considering any policy recalibration.”
“Pending greater clarity, we maintain our 2026 GDP growth forecast at 4.5% (BNM est: 4.0%–5.0%; 2025: 5.2%). This outlook incorporates ongoing targeted and tactical government measures to support affected households and businesses, with additional measures expected to be announced as conditions evolve.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Source: https://www.fxstreet.com/news/malaysia-growth-risks-and-steady-rates-uob-202605151909
