The report indicated that this stance provided a stable monetary environment to support Malaysia’s economic expansion, with Gross Domestic Product (GDP) projected to grow by 4.3% despite heightened global uncertainties.
According to the report, domestic growth momentum was expected to remain resilient, supported by sustained micro, small, and medium enterprise (MSME) activities and continued policy support. These factors were expected to help cushion the economy against external headwinds arising from rising protectionism and ongoing geopolitical tensions. Overall, the growth outlook was broadly aligned with projections by the Ministry of Finance Malaysia, the International Monetary Fund, and the World Bank.
SME Bank’s Relief President and Chief Executive Officer, Samad Majid Zain, said, “Malaysia’s growth outlook for 2026 remains resilient, driven by the strength of MSMEs in sustaining domestic demand, employment, and productivity.
The National Budget 2026 reinforces this momentum with RM50 billion in financing and guarantee facilities with SME Bank entrusted to implement nearly RM2 billion in strategic national initiatives to support MSMEs scaling, technology adoption, and productivity enhancement across priority sectors, in alignment with BNM’s Performance Measurement Framework and the Government’s MADANI economic framework.”
Key highlights from the report included:
- Services were likely to cushion overall growth, supported by resilient household consumption underpinned by accommodative monetary and fiscal policies, including higher allocations for Sumbangan Asas Rahmah, Sumbangan Tunai Rahmah, and Phase 2 civil servant salary adjustments, which were expected to help ease cost pressures and sustain consumption.
- Manufacturing faced higher tariff exposure, as 67.1% of the Industrial Production Index was export-oriented, increasing vulnerability to external demand shocks and trade policy developments.
- Construction activity was set to normalise following two years of exceptional post-pandemic growth driven by infrastructure and private sector projects.
- The mining sector was expected to remain subdued, constrained by moderating demand from key importing economies and lower global crude oil prices.
“We project inflation to rise moderately to 1.7% in 2026, remaining at a manageable level. Headline inflation averaged 1.4% year on year for the first 11 months of 2025, lower than 1.9% in the corresponding period in 2024, before edging higher from July 2025 following the expansion of the Sales and Service Tax to additional service sectors, selected non-essential goods, and utility tariff adjustments. Looking ahead, lower Brent crude oil prices, expectations of a stronger ringgit compared to the 2025 average, and the absence of further fuel subsidy rationalisation this year should help keep inflation in check,” said Mazlina Abdul Rahman, SME Bank’s Head of Economic Research.
The full report can be accessed at:
https://go.smebank.com.my/ECO2026
