Alvin Desfiandi, chief economist at the Center for Market Education, said the central bank’s projections may be” too rosy”, especially its top-end forecast of 5% GDP growth, while Ahamed Kameel Mydin Meera of Universiti Sultan Azlan Shah said he believed the target was realistic and achievable.
Desfiandi said BNM’s upward revision of GDP growth could have come too early, as the International Monetary Fund had said the Middle East conflict had already disrupted 30% of world oil supplies and 20% of liquefied natural gas.
“I believe this is enough to create a large shock to the economy by affecting external demand, freight costs and market confidence. I’d say the lower half of BNM’s projection range is plausible, while the 5% is quite (overly) optimistic,” he told FMT, adding that getting the forecast wrong could impact the central bank’s credibility.
Desfiandi said BNM projections for the electrical and electronics sector were realistic; however, a global slowdown was a massive and real risk brought about by the war on Iran.
While government interventions for fuel would protect domestic spending, he said this would only work as a stabiliser rather than an economic catalyst, yielding a limited effect on domestic consumption.
“All in all, Malaysia will probably still grow solidly in 2026, but it would not be near 5% if the conflict persists.”
On the other hand, Kameel expected GDP growth to be buoyed by Malaysia’s standing as a “huge” net exporter of LNG, a factor which enables the nation to have a net surplus in the oil and gas sector.
“So Malaysia is expected to gain in this aspect due to current global energy uncertainties,” he said.
The economist also said palm oil prices are expected to rise since the commodity is widely used in downstream industries and could even be used in bioenergy amid the energy crisis worldwide. “So we will gain through palm oil, too.”
Earlier, BNM governor Abdul Rasheed Ghaffour said investment expansion, resilient domestic spending, tourism strength and strong export demand are expected to be the main drivers for growth again this year.
Rasheed said the central bank’s projections accounted for various scenarios for the Iran war, while the country’s domestic resilience and diversified export structure gave it a solid foundation to navigate the external headwinds.
Rise in inflation
Kameel said he expected the inflation rate to be much higher than BNM’s projection of headline inflation between 1.5% and 2.5% this year.
He said people should expect inflation and the cost of living to rise as a result of the war, describing it as a no-brainer, since nearly 50% of the country’s crude oil supply passes through the Strait of Hormuz.
He added that about 30% to 40% of Malaysia’s fertiliser imports also pass through the strait, which means the price of fresh produce could surge.
“Oil, being an input for almost every production and distribution process, would surely exert inflationary pressure on almost all products and services, including agriculture. So fuel and food prices are surely to rise and I expect it to be higher than 2.5%, causing the rakyat to be much burdened,” said Kameel.
However, Desfiandi said BNM’s inflation projection was more plausible thanks to Malaysia’s buffers, namely its standing as a net energy exporting country, the ringgit’s strong position, as well as government interventions like fuel subsidies and cash aid.
But he said there were already reports of Asian countries facing shortages or higher prices for packaging like bottles, cans and cartons, which would affect packaged products like milk.
In these cases, he pointed out the cost pressure did not come from the product itself but the whole supply chain; in this case, the packaging.
“BNM has flagged food and import-sensitive sectors as upside inflation risks under these circumstances. So, I would expect more strain at the sector level if the conflict persists.”