KUALA LUMPUR (April 17): Malaysia’s slower-than-expected advance economic growth estimates in the first quarter is a sign of more moderation to come as spillovers from the Middle East conflict begin to materialise, according to economists.
The 5.3% advance gross domestic product (GDP) growth estimates for the first quarter points to a firm start to the year, but also suggests “early signs of moderation”, UOB wrote in a note on Friday. The advance print came below Bloomberg consensus of 5.5% and the 6.3% in the final quarter of 2025.
It sees a further slowdown in quarters ahead, in line with its baseline full-year forecast of 4.5%, though noting “downrisks are elevated going into 2Q2026-3Q2026”.
The US-Iran war, going into its eighth week, has economies grappling with elevated energy prices. Brent crude previously surged above US$100 (RM395) per barrel from US$70 pre-conflict, but has since tempered on prospects of continued peace talks.
However, a prolonged or intensified escalation may exert upward pressure on oil prices and weigh on Malaysia’s growth outlook.
An increase in Brent to US$140 per barrel would dent growth by 0.5 percentage point, RHB noted, bringing full-year GDP growth to 4.2%.
If elevated oil prices persist through 3Q2026, accompanied by broader supply chain disruptions, downside risk could widen to 0.8-1.0 percentage point, it added, implying growth of 3.7% to 3.9%.
“Should these risks materialise, 2026 GDP growth could skew to the downside at around 4%, with external headwinds partly offset by Malaysia’s robust domestic fundamentals, proactive policy support, and its position as a net energy exporter, which may provide partial cushioning,” RHB said. It maintained its GDP forecast of 4.7%.
A prolonged war would disrupt global supply chains, while rising prices would erode purchasing power and dampen demand.
That said, economists recognise Malaysia is better positioned among Asean peers to weather the negative ripples of the current conflict scenario.
Growth remains anchored by domestic sectors, higher household incomes, low unemployment, realisation of approved investment and potentially enhanced targeted cash transfers, Kenanga Research noted.