Bank Negara forecasts 4%-5% GDP growth despite Iran war

 Investment expansion, resilient domestic spending, tourism strength and strong export demand expected to be the main drivers again this year.

BNM governor Abdul Rasheed Ghaffour said it is important for Malaysia to focus on strengthening its economic fundamentals and policy buffers amid the uncertainties caused by the Middle East conflict. (Envato Elements pic)

KUALA LUMPUR:

 Bank Negara Malaysia (BNM) is projecting a 4% to 5% gross domestic product (GDP) growth in 2026 despite the ongoing Iran war, which has resulted in a surge in crude oil prices and energy crises in some countries.

The numbers are a slight upward revision of the government’s initial forecast of a 4% to 4.5% GDP growth this year.

Investment expansion, resilient domestic spending, tourism strength and strong export demand, which helped drive the 5.2% GDP growth recorded last year, are expected to be the main drivers for growth again.

In terms of exports, the central bank projects sustained global demand, particularly for electrical and electronic exports.

The tourism sector, meanwhile, is expected to be bolstered by steady arrivals thanks to the Visit Malaysia 2026 campaign, despite reports of cancelled trips as an immediate result of the Middle East conflict.

BNM governor Abdul Rasheed Ghaffour acknowledged that uncertainties shaped the outlook for the year ahead, while the Middle East conflict added another layer of precariousness.

He said the extent of the conflict’s impact hinged on its duration and severity.

“In this environment, Malaysia’s domestic resilience and diversified export structure provide a solid foundation for navigating the current external headwinds.

“Our standing as a net energy exporter will also lend us some resilience against increases in global commodity prices,” he said in BNM’s 2025 annual report released today.

Rasheed said it was essential for Malaysia to focus on strengthening its economic fundamentals and policy buffers, adding that reforms implemented in the past year had gone some way in achieving that.

He said the reforms, such as the targeted RON95 petrol and diesel subsidies, were necessary to ensure that the nation grows in an inclusive and sustainable manner.

“Malaysia’s path to becoming a developed, high-income nation must be paved with shared prosperity,” he said.

“We must build an economy that creates better paying jobs, supports our households and businesses, and remains resilient for decades to come.”

Rasheed also said BNM would remain vigilant as the year progresses to navigate the challenges ahead.

“We stand ready – as we have through successive periods of heightened uncertainty – to ensure orderly markets and manage the risks of excessive volatility.” - FMT