The ADB forecast is broadly in line with projections by the World Bank, Bank Negara Malaysia (BNM), and the government.
BNM expects growth of 4% to 5%, while the statistics department has projected growth of 4% to 4.5%. The World Bank recently revised its forecast upwards to 4.4% from 4.1%.
In its latest Asian Development Outlook report released today, ADB said the delayed effects of tax reforms and tighter trade measures introduced in 2025 were likely to weigh on near-term growth.
“By 2027, although external challenges may persist, planned initiatives under the 13th Malaysia Plan (13MP) should support growth.
“The 13MP sets out the country’s medium‑term vision, prioritising higher‑value economic sectors,” it said.
ADB said the growth would be supported by a substantial RM611 billion in investment, but warned of significant downside risks in the event of a prolonged Middle East conflict.
Inflation is expected to remain contained at 1.8% in 2026 and 1.9% in 2027, though upward pressure may come from tariff adjustments and the delayed impact of the expanded sales and service tax.
ADB also warned that rising oil prices could lift production costs and eventually feed into higher consumer prices.
The ringgit is expected to strengthen, averaging slightly above RM4 against the US dollar and reflecting improved investor confidence.
A stronger currency would help reduce import costs for domestically-driven sectors but could weigh on export competitiveness.
Exports are expected to face global headwinds, though the technology sector may benefit from a recovery in artificial intelligence, automotive, industrial and consumer electronics demand, with global semiconductor sales forecast to rise 26% in 2026.
Tourism is also expected to support services growth, boosted by the Visit Malaysia 2026 campaign targeting 47 million visitors, alongside tax incentives for domestic tourism spending.
Construction and investment activity are projected to remain strong, driven by demand for data centres, water infrastructure, and major projects including the Pan Borneo Highway, the Johor-Singapore Economic Zone, and developments in Sarawak and Sabah, each allocated at least RM6 billion under the 2026 budget.