Washington, DC – February 27, 2026 On February 20, 2026, the Executive Board of the International Monetary Fund (IMF) completed the Article IV Consultation for Malaysia. [1]
Malaysia's economy has shown notable resilience against global trade tensions and policy uncertainty. The economy continued to grow healthily, estimated at 4.9 percent in 2025, supported by strong domestic demand and a global tech-sector upcycle. [2] Inflation has been low and stable, with average headline inflation at 1.4 percent in 2025, amid declining food and fuel price inflation. The strong performance in part reflects sound and prudent macroeconomic policies. Fiscal consolidation has advanced under the Public Finance and Fiscal Responsibility Act, with the fiscal deficit estimated to be reduced from 4.1 percent of GDP in 2024 to 3.8 percent of GDP in 2025. Bank Negara Malaysia (BNM) reduced the Overnight Policy Rate to 2.75 percent in July 2025 and kept it unchanged since then. The authorities' 13th Malaysia Plan, released in July 2025, emphasizes the importance of fiscal discipline and stronger governance, and promotes social mobility, affordable housing, health and pension reform, and resilience against climate shocks.
Growth is expected to be resilient in the near term, supported by strong domestic demand, while slowing marginally to 4.6 percent in 2026 due to higher U.S. tariffs and a moderately contractionary fiscal policy stance. Inflation is projected to remain low and stable at 1.9 percent in 2026. Risks to growth are tilted to the downside, stemming mainly from external factors. Growth could be negatively affected by an escalation in protectionist trade measures, global financial market volatility, and a potential bust of the AI boom. However, upside risks can also materialize, including breakthroughs in global trade negotiations and faster implementation of structural reforms. Inflation risks are balanced.
Executive Board Assessment [3]
Executive Directors commended the notable resilience of Malaysia's economy against global uncertainty. Growth is expected to be supported by strong domestic demand, and inflation is projected to remain low and stable. Directors agreed that risks to growth are tilted to the downside, stemming mainly from external factors, although upside risks can also materialize.
Directors welcomed steady progress with fiscal consolidation under the Public Finance and Fiscal Responsibility Act. They generally encouraged the authorities to reduce the fiscal deficit further to 2.5 percent of GDP by 2028 to build fiscal buffers, anchored by high-quality and sustainable revenue and expenditure measures. Some Directors, however, assessed that the authorities' consolidation strategy is already well calibrated.
Directors agreed that the current monetary policy stance is appropriate and that monetary policy should stay data-dependent to continue to anchor inflation expectations and preserve growth. They welcomed continued efforts to deepen the foreign exchange market and build reserves. Directors also agreed on the importance of preserving exchange rate flexibility, which—alongside strengthening social safety nets and swiftly implementing structural reforms—would help reduce external imbalances.
Directors concurred that systemic financial sector risks remain contained. They noted that banks maintain ample capital and liquidity buffers, household balance sheets are healthy, and the housing market remains stable. Directors emphasized the importance of continued vigilance against pockets of vulnerabilities, such as highly leveraged households.
Directors encouraged the authorities to stand ready to respond agilely to possible external shocks. In the event of an adverse shock, they agreed that fiscal policy should cushion the negative impact on vulnerable households and affected firms, while any monetary policy response would have to depend on implications of the shock for inflation and output. While a flexible exchange rate would help mitigate the shock, a risk-off event could warrant the use of foreign exchange intervention to ease policy trade-offs. Directors agreed that if upside risks materialize, the authorities should use the opportunity to build macroeconomic buffers.
Directors agreed that swift implementation of structural reforms under the 13th Malaysia Plan is key for further domestic-driven and inclusive growth. They emphasized that labor market reforms aimed at increasing wages, reducing skill-related underemployment, and raising female labor force participation can help achieve the goals under the Plan. Deeper trade and financial integration within ASEAN can boost Malaysia's growth potenti
Table 1. Malaysia: Selected Economic and Financial Indicators, 2021–31 1/ Nominal GDP (2024): US$422.2 billion |
| | Population (2024): 34.1 million |
|
GDP per capita (2024, current prices): US$12,397 |
| | Poverty rate (2022, national poverty line): 6.2 percent |
|
Unemployment rate (2024): 3.2 percent |
| | Adult literacy rate (2022): 96.0 percent |
|
Main goods exports (share of total exports, 2024): Machinery and Transport Equipment (45.6 percent), Manufactured Goods and Miscellaneous Manufactured Articles (20.4 percent), and Mineral Fuels, Lubricants etc. (14.4 percent). |
| | | | | | Proj. |
| | | | | |
| | 2021 |
2022 |
2023 |
2024 |
2025 |
2026 |
2027 |
2028 |
2029 |
2030 |
2031 |
Real GDP (percent change) |
3.3 |
9.0 |
3.5 |
5.1 |
4.9 |
4.6 |
4.3 |
4.3 |
4.3 |
4.3 |
4.3 |
Total domestic demand |
3.8 |
9.7 |
5.0 |
4.9 |
4.7 |
5.0 |
4.4 |
4.2 |
4.4 |
4.3 |
4.3 |
Consumption |
2.5 |
10.3 |
4.4 |
5.0 |
4.9 |
4.7 |
4.3 |
4.3 |
4.3 |
4.3 |
4.3 |
Private consumption |
1.8 |
11.4 |
4.6 |
5.1 |
4.9 |
4.8 |
4.7 |
4.7 |
4.6 |
4.6 |
4.6 |
Public consumption |
5.8 |
5.6 |
3.4 |
4.7 |
4.5 |
4.3 |
2.2 |
2.9 |
2.9 |
2.8 |
2.8 |
Private investment |
2.8 |
7.3 |
4.5 |
12.3 |
7.0 |
6.0 |
5.5 |
5.5 |
5.0 |
4.5 |
4.5 |
Public gross fixed capital formation |
-11.0 |
5.4 |
8.5 |
11.1 |
3.5 |
3.0 |
1.2 |
1.6 |
1.7 |
1.7 |
1.7 |
Net exports (contribution to growth, percentage points) |
-0.3 |
-0.1 |
-1.2 |
0.4 |
0.4 |
-0.1 |
0.1 |
0.2 |
0.1 |
0.2 |
0.2 |
Output gap (in percent) |
-0.7 |
2.5 |
1.1 |
0.9 |
0.5 |
0.2 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Saving and investment (in percent of GDP) |
| | | | | | | | | | |
Gross domestic investment |
22.1 |
23.6 |
22.8 |
22.0 |
21.2 |
21.4 |
21.4 |
21.3 |
21.4 |
21.4 |
21.3 |
Gross national saving |
26.0 |
26.8 |
23.9 |
23.4 |
23.0 |
23.0 |
23.2 |
23.3 |
23.4 |
23.4 |
23.4 |
Fiscal sector (in percent of GDP) 2/ |
| | | | | | | | | | |
Federal government overall balance |
-6.4 |
-5.5 |
-5.0 |
-4.1 |
-3.8 |
-3.5 |
-3.2 |
-3.0 |
-3.0 |
-3.0 |
-3.0 |
Revenue |
15.1 |
16.4 |
17.3 |
16.8 |
16.4 |
15.9 |
15.7 |
15.7 |
15.6 |
15.5 |
15.5 |
Expenditure and net lending |
21.5 |
21.9 |
22.3 |
20.9 |
20.1 |
19.4 |
18.9 |
18.7 |
18.6 |
18.5 |
18.5 |
Federal government non-oil primary balance |
-6.7 |
-7.8 |
-6.6 |
-4.7 |
-3.9 |
-2.8 |
-2.4 |
-2.1 |
-2.0 |
-1.9 |
-1.8 |
Consolidated public sector overall balance 3/ |
-8.3 |
-5.9 |
-5.5 |
-6.4 |
-7.4 |
-6.0 |
-5.7 |
-5.5 |
-5.5 |
-5.5 |
-5.4 |
General government debt 3/ |
69.2 |
65.5 |
69.7 |
69.8 |
70.0 |
69.5 |
68.6 |
67.7 |
66.9 |
66.2 |
65.5 |
Of which: federal government debt |
63.3 |
60.1 |
64.3 |
64.6 |
64.8 |
64.3 |
63.5 |
62.6 |
61.7 |
61.0 |
60.4 |
Inflation and unemployment (in percent) |
| | | | | | | | | | |
CPI inflation, annual average |
2.5 |
3.4 |
2.5 |
1.8 |
1.4 |
1.9 |
2.0 |
2.0 |
2.0 |
2.0 |
2.0 |
CPI inflation, end of period |
3.2 |
3.8 |
1.5 |
1.7 |
1.6 |
2.0 |
2.0 |
2.0 |
2.0 |
2.0 |
2.0 |
CPI inflation (excluding food and energy), annual average |
0.7 |
3.0 |
3.0 |
1.8 |
2.0 |
2.0 |
2.0 |
2.0 |
2.0 |
2.0 |
2.0 |
CPI inflation (excluding food and energy), end of period |
1.1 |
4.1 |
1.9 |
1.6 |
2.3 |
2.0 |
2.0 |
2.0 |
2.0 |
2.0 |
2.0 |
Unemployment rate |
4.6 |
3.9 |
3.4 |
3.2 |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 |
3.0 |
Macrofinancial variables (end of period) |
| | | | | | | | | | |
Broad money (percentage change) 4/ |
5.6 |
4.0 |
5.8 |
3.3 |
4.5 |
6.0 |
6.2 |
6.2 |
6.4 |
6.5 |
6.4 |
Credit to private sector (percentage change) 4/ |
3.8 |
3.0 |
5.2 |
5.1 |
5.3 |
5.8 |
5.9 |
5.7 |
5.6 |
5.7 |
5.6 |
Credit-to-GDP ratio (in percent) 5/ 6/ |
137.7 |
122.3 |
126.7 |
125.7 |
125.2 |
124.3 |
123.4 |
122.3 |
121.3 |
120.5 |
119.6 |
Credit-to-GDP gap (in percent) 6/ 7/ |
… |
… |
| … |
| | | | | | |
Overnight policy rate (in percent) |
1.75 |
2.75 |
3.00 |
3.00 |
… |
… |
… |
… |
… |
… |
… |
Three-month interbank rate (in percent) |
2.0 |
3.6 |
3.6 |
3.5 |
… |
… |
… |
… |
… |
… |
… |
Nonfinancial corporate sector debt (in percent of GDP) |
109.0 |
97.5 |
101.2 |
… |
… |
… |
… |
… |
… |
… |
… |
Nonfinancial corporate sector debt issuance (in percent of GDP) |
2.6 |
2.4 |
2.5 |
… |
… |
… |
… |
… |
… |
… |
… |
Household debt (in percent of GDP) |
88.9 |
80.9 |
84.2 |
84.2 |
… |
… |
… |
… |
… |
… |
… |
Household financial assets (in percent of GDP) |
191.9 |
167.3 |
174.2 |
178.7 |
… |
… |
… |
… |
… |
… |
… |
House prices (percentage change) |
1.9 |
3.9 |
3.8 |
4.4 |
… |
… |
… |
… |
… |
… |
… |
Exchange rates (period average) |
| | | | | | | | | | |
Malaysian ringgit/U.S. dollar |
4.14 |
4.40 |
4.56 |
4.58 |
… |
… |
… |
… |
… |
… |
… |
Real effective exchange rate (percentage change) |
-1.3 |
-1.1 |
-2.8 |
1.1 |
… |
… |
… |
… |
… |
… |
… |
Balance of payments (in billions of U.S. dollars) 5/ |
| | | | | | | | | | |
Current account balance |
14.5 |
13.0 |
4.4 |
6.1 |
8.5 |
8.2 |
9.6 |
11.8 |
12.5 |
13.2 |
14.2 |
(In percent of GDP) |
3.9 |
3.2 |
1.1 |
1.4 |
1.8 |
1.6 |
1.8 |
2.0 |
2.0 |
2.0 |
2.0 |
Goods balance |
42.9 |
42.6 |
28.7 |
25.0 |
28.2 |
28.4 |
29.6 |
31.9 |
32.0 |
32.6 |
33.1 |
Services balance |
-15.8 |
-13.2 |
-9.6 |
-2.6 |
-1.6 |
-1.1 |
0.3 |
1.7 |
3.9 |
5.5 |
7.6 |
Income balance |
-12.5 |
-16.3 |
-14.7 |
-16.4 |
-18.2 |
-19.1 |
-20.3 |
-21.8 |
-23.3 |
-24.9 |
-26.5 |
Capital and financial account balance |
3.8 |
1.8 |
-1.6 |
-1.1 |
0.8 |
-2.8 |
-2.8 |
-3.8 |
-4.9 |
-5.1 |
-5.7 |
Of which: Direct investment |
7.5 |
2.9 |
1.9 |
3.9 |
3.5 |
3.6 |
3.8 |
4.0 |
4.1 |
4.3 |
4.9 |
Errors and omissions |
-7.3 |
-2.7 |
-7.3 |
-1.5 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Overall balance |
11.0 |
12.1 |
-4.5 |
3.4 |
9.3 |
5.4 |
6.9 |
8.0 |
7.7 |
8.1 |
8.5 |
Gross official reserves (US$ billions) 5/ |
116.9 |
114.7 |
113.5 |
116.2 |
125.5 |
130.9 |
137.7 |
145.7 |
153.4 |
161.5 |
170.0 |
(In months of following year's imports of goods and nonfactor services) |
4.9 |
5.4 |
4.9 |
4.7 |
4.9 |
4.8 |
4.9 |
5.0 |
5.0 |
5.0 |
5.0 |
(In percent of short-term debt by original maturity) |
120.8 |
104.9 |
96.3 |
90.2 |
85.6 |
84.8 |
84.5 |
85.0 |
85.3 |
85.3 |
85.4 |
(In percent of short-term debt by remaining maturity) |
90.8 |
82.5 |
76.2 |
71.3 |
69.1 |
68.5 |
68.3 |
68.9 |
69.2 |
69.4 |
70.1 |
Total external debt (in billions of U.S. dollars) 5/ |
258.7 |
259.6 |
275.4 |
304.4 |
324.1 |
340.8 |
358.0 |
374.8 |
391.3 |
409.2 |
427.0 |
(In percent of GDP) |
69.3 |
63.8 |
69.0 |
72.2 |
68.9 |
67.3 |
66.1 |
64.7 |
63.3 |
62.0 |
60.8 |
Of which: short-term (in percent of total, original maturity) |
37.4 |
42.1 |
42.8 |
42.3 |
45.2 |
45.3 |
45.5 |
45.7 |
45.9 |
46.3 |
46.6 |
short-term (in percent of total, remaining maturity) |
49.8 |
53.6 |
54.1 |
53.6 |
56.1 |
56.1 |
56.3 |
56.5 |
56.6 |
56.9 |
56.8 |
Debt service ratio 5/ |
| | | | | | | | | | |
(In percent of exports of goods and services) 7/ |
11.7 |
10.8 |
13.1 |
14.0 |
13.9 |
12.2 |
12.1 |
12.0 |
11.9 |
11.8 |
11.6 |
(In percent of exports of goods and nonfactor services) |
12.7 |
11.5 |
14.0 |
15.0 |
14.8 |
13.0 |
12.9 |
12.8 |
12.7 |
12.5 |
12.4 |
Memorandum items: |
| | | | | | | | | | |
Nominal GDP (in billions of ringgit) |
1,549 |
1,795 |
1,824 |
1,932 |
2,043 |
2,178 |
2,322 |
2,476 |
2,637 |
2,806 |
2,985 |
| | | | | | | | | | | | |
Sources: Data provided by the authorities; CEIC Data; World Bank; UNESCO; and IMF, Integrated Monetary Database, and staff estimates. |
1/ Data in this table are as of January 22, 2026, unless otherwise noted. 2/ Cash basis. 3/ Consolidated public sector includes general government and nonfinancial public enterprises (NFPEs). General government includes federal government, state and local governments, and statutory bodies. 4/ Based on data provided by the authorities, but follows compilation methodology used in IMF's Integrated Monetary Database. 5/ IMF staff estimates. U.S. dollar values are estimated using official data published in national currency. 6/ Based on a broader measure of liquidity. Credit gap is estimated on quarterly data from 2000, using one-sided Hodrick-Prescott filter with a large parameter. 7/ Includes receipts under the primary income account. |
|
[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
[2] Staff's estimate is based on information available as of January 22, 2026. Subsequent national accounts data released on February 13, 2026 show that Malaysia's GDP growth in 2025 was 5.2 percent.
[3] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm .
