KUALA LUMPUR (June 30): Higher electricity prices, caused by a surcharge following higher generation costs, contributed to Malaysia’s higher headline inflation of 2% in May, said Bank Negara Malaysia (BNM).

In its monthly highlights report for May 2026, the central bank said that headline inflation inched up to 2% from 1.9% in April, while core inflation remained unchanged at 2%.

“The slight increase in headline inflation largely reflected price developments of non-core items. Notably, prices for vegetables and electricity increased from the previous month. The increase in electricity prices reflected the imposition of surcharge following higher generation costs,” said BNM.

However, the central bank added that the inflationary pressure was partly offset by lower inflation for domestic airfares and retail fuel prices, especially in RON97 petrol and diesel.

Meanwhile, manufacturing production saw higher growth in April, with the Manufacturing Industrial Production Index growing at 8.3% in April, compared to 5.5% in March. Export-oriented clusters expanded by 8.5% in April, underpinned by higher production in electrical and electronics (E&E) products, such as refined petroleum and chemical products.

Private sector financing also strengthened in May. Credit growth in the private non-financial sector rose 6.4% year-on-year, compared with 5.8% in April, driven largely by businesses.

Outstanding corporate bonds expanded by 8% while outstanding business loans grew by 7%.

The increase in business loan growth was primarily driven by working capital purposes. Meanwhile, household loan growth was sustained at 5.5% in May.

Asset quality remained intact, with gross and net impaired loans ratio remaining unchanged at 1.4% and 1% respectively.

The banking system also recorded an aggregate liquidity coverage ratio of 149.2% in May, compared with 152.8% in April.

Meanwhile, the central bank said that financial markets continued to be shaped by geopolitical uncertainties in the Middle East, as well as the expected US Federal Reserve policy rate path.

Against this backdrop, the ringgit appreciated 0.1% against the US dollar during the month, broadly outperforming other regional currencies.