Malaysia's economy recorded a 5.4% year-on-year GDP growth in the first quarter of 2026, according to UOB’s Global Economics & Markets Research led by Julia Goh and Loke Siew Ting. This figure was slightly above estimates but marked a slowdown compared to the 4Q25 performance. The main drivers of growth were domestic demand and the services sector, while external headwinds, particularly the ongoing Middle East conflict and the effective closure of the Strait of Hormuz, have intensified downside risks to the outlook [1].
UOB has maintained its 2026 GDP growth forecast for Malaysia at 4.5%, which is within Bank Negara Malaysia’s (BNM) estimated range of 4.0%–5.0% and below the 2025 growth rate of 5.2%. The research team expects BNM to keep the Overnight Policy Rate (OPR) unchanged at 2.75% until there is greater clarity regarding growth and inflation trends. UOB anticipates that the central bank will wait for the next two to three months before considering any policy adjustments [1].
The outlook also factors in ongoing targeted and tactical government measures aimed at supporting households and businesses affected by current challenges, with the possibility of additional measures being announced as conditions evolve. No immediate market reactions or analyst opinions beyond UOB’s projections were discussed in the source [1].
CONCLUSION
Malaysia’s Q1 2026 GDP growth exceeded estimates but showed a slowdown from the previous quarter, with external risks weighing on the outlook. UOB expects Bank Negara Malaysia to maintain its policy rate at 2.75% in the near term, as the central bank awaits further clarity on economic conditions. The government is expected to continue supporting the economy with targeted measures.