KUALA LUMPUR, March 31 — Bank Negara Malaysia said today that Malaysia's growth will remain strong in 2026, despite global economic turbulence caused by the escalating conflict in the Middle East.

The central bank projected Malaysia’s gross domestic product for 2026 could be between 4-5 per cent as robust consumer spending, wage growth and continued investments would make the Southeast Asian nation resilient to external shocks.

BNM governor Datuk Seri Abdul Rasheed Gharfour told a news conference here that Malaysia is weathering the headwinds from the war from “a position of strength”, although he still did not discount the possibility that the forecast could be revised.

“Malaysia enters 2026 from a position of strength to navigate the challenges ahead. Our strength lies in diversified growth drivers, with cushions to preserve external sector strength. Second, the healthy balance sheet positions among households and firms,” he said. 

“Third, a strong financial sector that supports the economy to grow. And fourth, sufficient macroeconomic policy space, both monetary policy and fiscal policy. Considering all these factors, the Malaysian economy is expected to grow at a resilient pace of between 4 and 5 per cent in 2026.”

Inflation still manageable

Headline inflation is expected to stay low between 1.5 to 2.5 per cent, BNM said, even as concerns over energy and fertiliser supply disruptions heightened in expectation that the conflict could drag on.

The central bank said various support measures such as fuel and diesel subsidies, a stronger ringgit and the absence of excessive demand all help mitigate any potential cost pass-through to consumers.

Ghaffour said BNM remains vigilant:

“We enter 2026 from a position of strength, but strength does not mean total immunity,” he said.

“There are key risks to the growth outlook that we must continue to monitor, assess and manage. Downside risks are mainly external in nature, arising from slower global trade due to the Middle East conflict and tariffs, alongside lower commodity output.”

Overnight Policy Rate lowered

BNM lowered the OPR by 25 basis points last July. a move it said was a pre-emptive measure ensure support is in place should pressures intensify. 

Ghaffour did not indicate another round of cuts but said the Monetary Policy Committee (MPC) will stay vigilant to emerging risks, with decisions guided by assessments of risks to Malaysia’s economic outlook.

“Our focus remains to maintain price stability while fostering conditions that support sustainable growth.”

Debt and borrowings

Ghaffour said loan data indicates “sound” repayment capacity, with the share of risky and impaired borrowings among businesses and households remain low.

“The overall repayment capacity of businesses and households is sound...the majority of businesses are able to meet their debt obligations, while pockets of stress among a small segment of MSMEs remain contained.”

And lenders have shown strong capacity to continue financing business expansion.

Banks continue to extend credit, BNM said, mainly for working capital and investment, supported by a strong balance sheet and prudent lending standards. 

“This reflects the financial system’s key role in supporting adjustment and growth, rather than amplifying stress,” Ghaffour said.