KUALA LUMPUR, Aug 14 — Malaysia’s economy grew 6% in the second quarter of 2026, accelerating from 5.4% in the first quarter, as strong domestic demand, investment and exports continued to support economic activity.

The stronger performance was driven by resilient household spending, continued investment in structures and machinery, and robust export growth. Exports benefited from sustained demand for electrical and electronics (E&E) products, expanding services, and a rebound in liquefied natural gas (LNG) and non-E&E manufacturing exports.

On a quarter-on-quarter seasonally adjusted basis, the economy expanded 2.5%, compared with a contraction of 0.03% in the first quarter.

The services and manufacturing sectors remained key growth drivers. Services benefited particularly from business-related activities and the information and communication technology (ICT) subsector, supported by the expanding operationalisation of data centres. Manufacturing growth was led by export-oriented industries, especially E&E products amid strong artificial intelligence-related demand.

The mining and quarrying sector also returned to growth on stronger natural gas production.

Inflation remains moderate

Headline inflation rose to 1.9% in the second quarter from 1.6% in the first quarter, largely reflecting higher external cost pressures following the conflict in the Middle East.

Fuel inflation increased to 5%, compared with -1.5% in the previous quarter, amid higher RON97 and diesel prices.

However, core inflation eased to 1.9% from 2.1%, helped by slower increases in jewellery and watches as well as rent. Bank Negara Malaysia expects headline inflation to average between 1.5% and 2.5% for the year.

Ringgit broadly stable

The ringgit remained broadly stable against major trading-partner currencies during the quarter despite changing expectations over US monetary policy.

As of Aug 12, the currency had declined 0.9% against the US dollar on a year-to-date basis, while its nominal effective exchange rate was down 1%.

Bank Negara Malaysia said Malaysia’s strong domestic fundamentals, economic growth and ongoing structural reforms should continue to provide support for the ringgit.

Credit growth strengthens

Credit to the private non-financial sector expanded 6.4% in the second quarter, up from 5.6% in the first quarter.

Outstanding corporate bonds grew 8.1%, while business loans increased 7.2%, driven by financing for working capital and investment. Household loans expanded 5.3%, broadly stable from 5.4% in the first quarter.

Support also remains available for small and medium enterprises (SMEs) facing temporary financial difficulties. As of Aug 7, RM2.8 billion had been approved under the SME Stabilisation Relief Facility, benefiting more than 4,900 SME accounts.

Growth outlook remains at 4-5%

Despite the stronger-than-expected second-quarter performance, Bank Negara Malaysia maintained its 2026 growth projection at 4% to 5%, while saying recent developments suggest overall growth could be around 5%.

Governor Dato’ Sri Abdul Rasheed Ghaffour said the Malaysian economy remained on a firm footing despite external uncertainties.

“Malaysia is well-positioned to navigate these challenges from a position of strength and policy readiness,” he said.

Domestic growth is expected to remain supported by income gains, policy measures and investment in major public and private projects. Exports should continue to benefit from E&E demand linked to AI investment and global technology expansion, alongside a recovery in non-E&E exports, tourism spending and ICT services exports.

Bank Negara Malaysia expects inflationary pressures from the Middle East conflict to remain contained, with targeted fuel subsidies and stable domestic demand helping to limit the pass-through of higher global costs to consumers.