MALAYSIA’s economic momentum is expected to remain resilient in the near term, supported by stronger-than-expected second-quarter growth, robust external trade and improving labour demand.
Growth momentum would be sustained in the near term as the Leading Index (LI) rose faster at +1.3% year-on-year (yoy), underpinned by higher real imports of basic precious and non-ferrous metals and stable growth in real imports of semiconductors, largely in line with the resilient exports and production in the E&E sector.
GDP growth accelerated to +6.0%yoy in quarter two calendar year 2026 (2QCY26), marginally higher than the advance estimate of +5.8% yoy.
The stronger growth was driven by higher growth in the services and manufacturing sectors, in addition to the rebound in mining output, and stronger domestic spending.
Of the total GDP, +3.7ppt of the growth in the 2QCY26 was contributed by the sustained growth in domestic demand.
MBSB Research upgrades their projection for Malaysia’s 2026 GDP growth to +5.1% (previous forecast: +4.5%), taking into account the robust growth in the first half of calendar year 2026 on the back of resilient external trade performance.
“We remain cautious that Malaysia’s economic outlook may be constrained by several downside risks, such as escalation in geopolitical tensions, prolonged trade and supply disruptions, higher inflation, tighter trade rules and potentially weaker final demand,” said MBSB.
Malaysia’s labour market continued to show resilience as the unemployment rate remained at 3.0% in Jun-26. There were, however, signs of softening.
Labour force shrank by -0.5% yoy (May-26: +1.0%yoy). Meanwhile, the unemployment count edged higher to 518K (May-26: 513K), the highest level in 6 months.
Youth unemployment rate (aged 15-24), however, remained stable at 10.2%. Labour force participation rate also remained high at 70.9%.
Labour demand increased in Jul-26, with job vacancies increasing by +139.0K to 242.4K, continued to expand encouragingly as the level spiked above the 200K, improving significantly and being the highest level since Jun-23.
By sector, vacancies in the services sector increased by +60K to 126.7K, primarily due to the increase in accommodation and food services activities.
Vacancies in other sectors also increased especially in manufacturing (+47.1K), construction (+19.3K), and agriculture (+6.3K) sectors.
“We expect the 2026 unemployment rate to remain steady at 3.0%, unchanged from 2025,” said MBSB.
Job growth in domestic services and strong consumer spending continue to stabilise the economy. Accommodative monetary policy and stable labour outlook will continue to anchor domestic demand.
While geopolitical risks cloud the transport and travel sectors, the E&E sector’s structural pivot into AI and advanced semiconductors will keep demand for skilled labour highly robust.—Sept 2, 2026
Main image: New Straits Times
