KUALA LUMPUR (Jan 19): Economists are expecting Bank Negara Malaysia (BNM) to keep the overnight policy rate (OPR) unchanged at the upcoming January meeting, following a stronger-than-expected economic growth estimate for the fourth quarter of 2025 (4Q2025).
In a research note on Monday, CIMB Investment Bank Bhd cited the Department of Statistics Malaysia's advance 4Q2025 gross domestic product (GDP) growth estimate at 5.7% year-on-year (y-o-y), resulting in full-year growth of 4.9% for 2025.
Following the upside surprise, the research house expects Malaysia’s GDP to expand by 4.4%, up from its earlier forecasts of 4.1%.
As such, CIMB said the central bank could maintain a steady policy stance through the rest of 2026 amid expectations that economic growth will be at a moderate pace, balanced out by subdued inflation.
“We argue for a stable OPR (overnight policy rate) outlook — assuming benign demand-pull inflationary pressures due to MYR strength and expanded productive capacities,” said CIMB.
CIMB economists noted that inflation is likely to average at 1.5% y-o-y in 2026. It said that there have been “no clear signs” of rising inflation as energy prices and input costs are still low.
Upside risks to inflation are also seen as limited following the excise duty hike on alcohol and tobacco in November. Economists expect no further adjustments to government-administered prices.
CIMB economists said the stronger-than-expected outturn was broad-based, led by the services sector, supported by wholesale and retail trade, transportation and storage, as well as food and beverages and accommodation. The construction sector also continued to outperform, driven by non-residential buildings and specialised construction activities.
Looking ahead, CIMB expects GDP growth in 2026 to be underpinned mainly by services, supported by domestic demand, the second round of civil servant salary adjustments, government cash assistance programmes such as SARA and STR, and tourism-related activity under Visit Malaysia 2026.
This is expected to be partly offset by a moderation in the manufacturing sector, particularly as external demand for non-electrical and electronics exports weakens.
Public Investment Bank Bhd economists also noted that the fourth quarter GDP growth was broad-based across major sectors, including services, manufacturing and construction. It also said the services sector remained the main growth driver, followed by manufacturing and construction.
Public Investment added that the firmer fourth-quarter performance introduces a modest upside bias to its full-year 2025 GDP forecast of 4.7%, with risks tilted towards 4.9% if momentum is sustained into year-end, even as growth is expected to moderate going into 2026.