Malaysian Finance Ministry Raises Growth Forecast as Strong First-Half Beats Projections

By Ying Xian Wong

KUALA LUMPUR, Malaysia--Malaysia raised its full-year economic growth forecast to between 4.8% and 5.3% after a stronger-than-expected first-half performance.

The economy grew 5.7% in the first half of the year, beating earlier projections for 4.0% to 4.5% despite external headwinds, the Ministry of Finance announced in its annual outlook report on Friday. The gains were driven by resilient domestic demand, steady investment and sustained tourism, it said.

"Full-year growth is now expected to be at the upper end of the projected range," said Prime Minister and Finance Minister Anwar Ibrahim, adding that growth in the second half is expected be 4.7%.

For next year, the ministry expects GDP growth of between 4.2% and 5.2%, supported by favorable labor market conditions, rising incomes, strong investment, and a semiconductor sector boost from a global tech upcycle.

Malaysia's GDP grew 5.2% in 2025.

However, global headwinds remain a concern. Elevated energy prices, persistent supply-chain friction and climate risks continue to affect prices, subsidies, and public spending, Anwar said.

"The year ahead will remain challenging," said Anwar. "Geopolitical fragmentation, climate risks, and rapid technological change will continue to reshape the global economic landscape," he added.

Consumer inflation is expected to be higher than previously forecast this year and trend higher into early next year due to rising oil prices. It is projected to then ease as supply pressures normalize and demand-pull inflation remains contained.

Malaysia announced a 2027 federal budget of 459.84 billion ringgit, equivalent to $112.52 billion, and lowered its fiscal deficit target to 3.3% of gross domestic product from 3.6% in 2026.

The government revised this year's deficit target up from 3.5% to cushion the impact of higher oil prices through fuel subsidies amid Middle East tensions.

The budget included measures to broaden fiscal revenue, reprioritize spending and strengthen governance.

Government revenue is projected to rise to 380.82 billion ringgit in 2027 from 363.64 billion ringgit in 2026, in part thanks to improved tax collection and higher petroleum-related revenue amid higher global crude oil prices.

Operating expenditure is expected to increase 3.8% to 376.84 billion ringgit, while development spending is set at 83 billion ringgit, the ministry said.

Write to Ying Xian Wong at yingxian.wong@wsj.com

(END) Dow Jones Newswires

October 09, 2026 03:44 ET (07:44 GMT)