It forecasts Malaysia’s gross domestic product (GDP) to expand between 4-4.5% next year compared to 4-4.8% this year.
The economy recorded a steady 4.4% increase in the first half of the year, the ministry said in its 2026 Economic Outlook report released today.
It said these projections are consistent with the International Monetary Fund’s (IMF) World Economic Outlook Update in July, which forecasted Malaysia’s growth at 4.5% in 2025 and 4% in 2026.
In its pre-budget statement issued in August, the ministry said the economy is expected to grow at a moderate pace in 2026 amid heightened global trade uncertainties and subdued external demand.
Bank Negara Malaysia said last month that slower global trade, weaker sentiment, and lower-than-expected commodity production remain downside risks to the country’s growth outlook in 2026.
Meanwhile, the World Bank expects Malaysia’s economic growth to remain at 4.1% in 2026, with momentum likely to be restrained by both external and domestic headwinds.
Its lead economist for Malaysia Apurva Sanghi said on Tuesday that export growth is expected to slow following frontloading activities this year, while domestic demand is projected to moderate.
He added that Malaysia’s economy remains highly sensitive to the performance of its key trading partners, particularly the US and China.
Strong domestic demand
The ministry said economic growth will be driven primarily by strong domestic demand, moderate inflation, and proactive fiscal and monetary policies.
The services sector is expected to expand by 5.2% next year, with construction (6.1%), manufacturing (3%) and agriculture (2.2%) also set to post positive growth. The sectors are expected to grow by 5.1%, 10.1%, 3.8% and 1.2% this year.
“The economy continues to be guided by the Madani economic framework, with the government committed to positioning Malaysia as an attractive destination for quality investments.
“At the same time, ongoing improvements in the wage-setting mechanism and rising business efficiency are expected to strengthen wage structures, contributing to a higher share of labour income in the overall economy,” it added.
The ministry said the economy will also be boosted by key events such as its chairmanship of Asean this year and Visit Malaysia 2026, which are expected to spur tourism, trade, and investment activities.
Deputy prime minister Ahmad Zahid Hamidi said last month that Malaysia aimed to welcome 47 million foreign visitors in 2026. Malaysia recorded 38 million foreign visitors in 2024, a 31.1% increase from 2023.