KUALA LUMPUR, April 9 — The World Bank Group has raised Malaysia’s economic growth forecast for 2026 to 4.4 per cent from 4.1 per cent, citing resilient domestic demand, its lead economist for Malaysia, Apurva Sanghi, said.
He said growth would be driven mainly by private consumption, underpinned by favourable labour market conditions, wage gains and government income support measures.
“We expect domestic demand to be strong this year because of favourable labour market dynamics, with real median wages rising by 6 per cent last year, as well as continued government support where required.
“So private consumption is definitely a key contributor to growth,” he told reporters at a briefing on Part 1 of the World Bank’s April 2026 Malaysia Economic Monitor (MEM), titled ‘Raising the Ceiling, Raising the Floor, Advancing Malaysia’s Jobs and Productivity Agenda’, today.
Last year, Malaysia’s economy grew by 5.2 per cent on account of strong domestic demand and favourable exports.
Sanghi said the projection for this year is above the regional growth of 4.2 per cent, with the outlook also influenced by three external factors, namely the West Asia conflict, US tariffs and China’s re-direction.
On the West Asia conflict, he said the ongoing crisis is expected to heighten global economic uncertainty, with its impact remaining difficult to predict given the rapidly evolving situation.
“Crude oil prices have been fluctuating, increasing by nearly 40 per cent between February and March. Prices of nitrogen-based fertilisers nearly doubled between February and March. Prices of LNG shipments to Asia have increased by almost two-thirds.
“Even if the conflict were to end tomorrow, it would still take time for energy, food and supply chains to resume or pick up. So the downside risks to a forecast of 4.4 per cent in 2026 are immense, and this is an evolving situation, so let’s wait and see how it plays out,” he said.
Meanwhile, on US tariffs, he said that currently about 46 per cent of Malaysia’s exports are exempt from tariffs, largely due to its strong electrical and electronic (E&E) as well as machinery segments, but these exemptions could be withdrawn at short notice.
Hence, Sanghi said this poses a significant risk to Malaysia, given its high reliance on the E&E sector, which accounts for nearly 30 per cent of the country’s domestic value-added — the highest in Asean — leaving it more exposed than its regional peers to shifts in US trade policy.
“So the bottom line is that Malaysia cannot rely on tariff differentials alone for increasing competitiveness. It needs to foster more innovation,” he said.
On China’s re-direction, he said the country’s export re-direction to third markets is emerging as another factor shaping the regional economic landscape, driven by weak domestic demand and expanding industrial capacity that has led to a growing manufacturing surplus.
“One survey indicated that 75 per cent of Chinese exporters intend to offset declining exports to the US by expanding into third markets such as Malaysia,” he said, adding that Malaysia recorded the fourth-largest increase in exports from China among Asean countries.
However, in comparison with regional peers, Malaysia’s exposure appears more moderate, with countries such as Vietnam, Thailand and Indonesia facing a larger impact from China’s export diversion.
He highlighted that Malaysia’s imports from China include not only consumption goods, but also intermediate and capital goods that support domestic production.
Hence, he said the balanced structure is relatively favourable, as an influx dominated by low-cost consumption goods could otherwise pose greater risks to local manufacturing.
Overall, concerns over an influx of Chinese goods should be assessed carefully, with policymakers encouraged to adopt targeted measures rather than broad-based restrictions on bilateral trade, he added. — Bernama
