KUALA LUMPUR – Malaysia reported a surprise surge in economic growth in the second quarter as robust services and electronics exports countered the impact of the war in the Middle East.
Gross domestic product rose 5.8 per cent in the three months through June from a year earlier, according to advance estimates from the Department of Statistics Malaysia on July 17, beating the 5.2 per cent median prediction in a Bloomberg survey.
In the first three months of 2026, the economy grew 5.4 per cent.
Strong domestic demand and a boom in semiconductor exports have helped offset disruptions from the conflict in the Middle East, reinforcing expectations that Malaysia’s economy can remain one of South-east Asia’s fastest-growing in 2026.
A surge in investment tied to semiconductors and artificial intelligence has helped sustain growth even as the global outlook has become more uncertain.
“The services sector remained the main driver of economic growth in the second quarter of 2026,” the department said.
The mining sector also rebounded to grow 10.2 per cent, driven by natural gas. Construction expanded by 6.6 per cent, supported in part by data centre projects.
Inflation, meanwhile, eased to 1.9 per cent in June, with analysts having expected it to stay at May’s 2 per cent level.
Malaysia has largely contained consumer price increases through fuel subsidies that have offset the impact of elevated crude prices.
The ringgit held a 0.2 per cent drop against the US dollar after the data, which add to evidence that South-east Asian economies are withstanding the impact of the conflict in the Middle East.
Singapore and Vietnam also reported stronger-than-expected second-quarter gross domestic product data.
But the global outlook remains uncertain, with China’s economy having expanded slower than expected in the last quarter.
The overall economy expanded 5.6 per cent in the first half of 2026, from 4.5 per cent a year earlier, the statistics department said in a separate statement.
The first-half performance “puts the economy on a firmer footing than we had assumed”, Julia Goh, an economist at UOB, said in an e-mail. “We will review our full-year forecast of 4.5 per cent, with risks now tilted to the upside of our current projection.”
Malaysia’s resilient economy has led some analysts to forecast that the central bank may raise interest rates.
Bank Negara Malaysia (BNM) held the overnight policy rate at 2.75 per cent last week.
“The growth-inflation mix justifies BNM remaining on hold at its July meeting, but we do continue to see a case for normalising,” said Lavanya Venkateswaran, a senior economist at OCBC. “I still see a higher probability that BNM will normalise the policy rate to 3 per cent in January 2027.”
Preliminary GDP data, which will provide a detailed analysis of the second quarter, will be released on Aug 14. BLOOMBERG
