KUALA LUMPUR (March 3): RAM Ratings has cautioned that current global headwinds could weigh on the upside of Malaysia’s economic growth this year.

Although it kept its 2026 growth projection intact, the rating agency flagged two key risks for this year’s outlook, with the first being the reversal of US reciprocal tariffs. 

RAM noted that the US Supreme Court’s decision to strike down reciprocal tariffs under the International Emergency Economic Powers Act (IEEPA) provided only temporary relief. 

A new blanket 10% tariff has since been imposed, with a possible increase to 15% under consideration. 

"While both tariff scenarios are less punitive than the 19% tariff under the Agreement on Reciprocal Trade (ART), uncertainty remains elevated. 

"New tariff measures could still be introduced by the US using alternative legal frameworks within the 150-day window. We also remain cautious on potential new tariffs targeting semiconductors that could impede Malaysia’s growth momentum," it said in a statement on Tuesday.

Secondly, RAM said the escalation of the conflicts in the Middle East has caused significant risks to the global oil market.

Iran’s threat to close the Strait of Hormuz could keep oil prices elevated.

"This narrow maritime chokepoint bordering Iran (Strait of Hormuz) handles close to 30% of global seaborne oil trade, equivalent to around 20% of global oil and petroleum consumption, based on data from 2020 till 1Q2025. 

"Iran also accounts for about 3% of global output, making it the fourth-largest producer in Opec."

RAM said for Malaysia, the most immediate impact would be higher oil prices and potential supply disruption, given that around 30% of mineral fuel imports originate from the Middle East.

However, it said broader trade disruption is seen to be relatively limited, as the Middle East is not a major trading partner for Malaysia. 

"Malaysia’s exports to and imports from the Middle East account for only 1.9% and 4.7% of overall exports and imports, respectively," said RAM.

Therefore, for 2026, RAM projects Malaysia’s gross domestic product (GDP) growth to be maintained, the consumer price index to be at 1%-2%, the overnight policy rate to remain unchanged at 2.75%, the fiscal deficit to be at least -4% of GDP, government debt to stand at close to 66% of GDP, gross government securities and investment issuance to be between RM175 billion-RM185 billion, and corporate bond issuance to be between RM130 billion-RM140 billion.

Malaysia’s economy expanded 6.3% in the fourth quarter of 2025 ended Dec 31 (4QFY2025), compared with 5.3% in the third quarter, supported by stronger services and manufacturing growth.