ADB raises Malaysia's 2026 growth forecast to 4.9%, keeps inflation at 2.0%

Facts

Forecasts: in the Asian Development Outlook September 2026, published on 23 September 2026, ADB raised Malaysia's real GDP growth forecast to 4.9% for 2026 (raised from 4.6% in ADO July 2026) and 4.7% for 2027 (raised from 4.5% in ADO July 2026), after growth of 5.2% in 2025. ¹ ADB said first-half growth exceeded its forecasts but full-year growth will still be lower than in 2025. ²

Prices: inflation is forecast at 2.0% in 2026 (unchanged from ADO July 2026). ³

Drivers and risks named by ADB: semiconductor demand, a second wave of data-centre investment, tourism and public infrastructure on the upside; disruption from the Middle East conflict, El Niño effects on local output in 2027 and elevated international prices constraining household consumption on the downside. It expects continued fuel subsidies and cash transfers to low-income households to support household spending.

Analysis

ADB's new forecast is close to Bank Negara Malaysia's own projection of about 5% and below actual first-half growth of 5.7%, so it points to a slower second half rather than a downturn.

The regional contrast is sharp. In the same edition ADB cut the Philippines to 3.3% with inflation at 5.9%, and kept Indonesia at 5.2% while raising its inflation forecast to 3.3%. Malaysia is the only one of the three with a growth upgrade and has the lowest inflation forecast, with the policy rate held at 2.75%.

For household credit, the macro backdrop is supportive but the balance sheet is already heavy: household debt stands at 84.8% of GDP, and the chart shows credit to the private non-financial sector growing at a steady pace through July. Growth that relies on subsidies and transfers leaves lower-income borrowers exposed if those measures are narrowed.

Implications

Counterpoints and uncertainties

ADB's upgrade rests on semiconductor and data-centre demand that can reverse quickly, and it flags El Niño and Middle East risks for 2027. Budget 2027, due on 9 October, may change subsidy and transfer settings that underpin the household-spending outlook.