HSBC raises Malaysia’s 2026 growth forecast to 5.5 per cent

HSBC has lifted its forecast for Malaysia’s 2026 gross domestic product growth from 5.2 per cent to 5.5 per cent, citing strength in domestic demand and electronics exports. That would mark the fastest annual expansion since the economy’s 8.7 per cent post-pandemic rebound in 2022.

The revision followed an advance estimate showing third-quarter growth of 5.3 per cent, which exceeded the bank’s expectations. HSBC now projects fourth-quarter growth of 5.3 per cent, compared with its previous forecast of 4.7 per cent.

Sunway University economics professor Dr Yeah Kim Leng said the annual projection was credible, though above consensus. He pointed to growth of 5.5 per cent over the first three quarters, supported by consumption, investment and low inflation. However, he warned that base effects and normalising overseas demand could slightly restrain the outcome.

HSBC said demand linked to artificial intelligence was benefiting Malaysia, with electronics exports posting record growth of 60 per cent year-on-year, measured as a three-month moving average. It also cited subsidies and infrastructure development as support for domestic activity. Headline inflation averaged 1.8 per cent during the first nine months of 2026.

On monetary policy, HSBC expects Bank Negara Malaysia to keep its overnight policy rate at 2.75 per cent at the November 5 meeting, judging underlying inflation insufficient to justify an immediate increase. Yeah also expects no change, although he said policymakers could signal a more hawkish stance.

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said a November increase was possible as stronger growth could warrant withdrawing some policy support. HSBC instead forecasts a 25-basis-point rise to 3 per cent in the first quarter of 2027. It expects economic growth to ease to 5 per cent in 2027 and 4.7 per cent in 2028.