Bank Negara Malaysia (BNM) governor Abdul Rasheed Ghaffour said household spending remained underpinned by favourable labour market conditions and a low unemployment rate, alongside targeted policy measures.
He also said that the economy was supported by continued export expansion in electrical and electronics (E&E), as well as travel and ICT services.
“We project that the economy will grow between 4% and 5% in 2026 despite ongoing geopolitical and trade disruptions,” he said, adding that the outlook remained subject to both upside and downside risks.
On a quarter-on-quarter, seasonally adjusted basis, the economy contracted by -0.01% given last quarter’s very strong performance. Malaysia recorded a full-year GDP of 5.2% last year.
Meanwhile, gross import growth moderated amid slower growth in capital, intermediate, and consumer goods import.
Rasheed announced this at the central bank’s headquarters here today. Chief statistician Uzir Mahidin also attended the event.
Rasheed said Malaysia had weathered major challenges in the past and remained well-positioned to navigate current uncertainties.
He added that on the supply side, growth in the services sector moderated, reflecting a moderation in motor vehicle sales following the front-loading of purchases in the fourth quarter ahead of the expiration of import duty waivers for electric vehicles.
“Meanwhile, manufacturing sector performance remained supported by stronger E&E performance, in line with continued demand for artificial intelligence and data centre-related components.
“Growth in the agriculture sector was lower amid normalisation in palm oil production following previously high output and ongoing replanting activities,” he said.
Headline inflation
Rasheed said headline inflation increased to 1.6% for Q1 2026, compared to 1.3% recorded in the previous quarter. Core inflation, on the other hand, moderated to 2.1% compared to 2.3% in Q4 2025.
“The higher headline inflation reflected some initial cost pass-through of higher global cost pressures, partly due to the conflict in the Middle East,” he said, adding that electricity charges and fuel prices, mainly RON97 and diesel, increased during the quarter.
These increases were partly offset by lower core inflation, mainly reflecting softer inflation in food away from home at 2.4%, down 0.4% from the previous quarter, and rental inflation at 1.6%, compared with 1.9% in Q4 2025.
Rasheed also said headline inflation was projected to average at 1.5%–2.5% in 2026. Following the Middle East conflict, inflation is expected to edge higher due to elevated global energy and other key commodity prices, broadly in line with expectations.
Credit growth
Credit growth to the private non-financial sector increased to 5.6% in the first quarter of 2026 from 5.3% in Q4 2025, following higher growth in outstanding loans (5.6%), particularly among businesses.
Business loans expanded by 5.8% compared to 5.9% in Q4 2025, mainly due to higher loan growth among non-SMEs, while SMEs loan growth was broadly sustained at 6%, up by 0.1% from last quarter.
For households, loan growth remained stable at 5.4%, dropping from last quarter’s 5.5%, with steady loan growth across most purposes.