In 2Q 2026, Malaysia's real GDP grew by 6.0% year-on-year (figure 1), up from a 5.4% growth in the previous quarter.

Apart from the agriculture sector, all other economic sectors grew in 2Q 2026 (table 1).

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Services, the largest economic sector, which accounts for 59.6% of GDP, increased by 5.9% year-on-year in 2Q 2026. Growth was underpinned by increases across all sub-sectors, especially wholesale & retail trade (4.7%), information & communication (8.3%), and transportation & storage (7.0%) sub-sectors.

Manufacturing, the second-largest economic sector (23.3% of GDP), grew by 7.3% year-on-year in 2Q 2026. This was mainly attributed to growth in the electrical, electronic & optical products (14.4%), non-metallic mineral products, basic metal & fabricated metal products (5.5%), and the rebound in petroleum, chemical, rubber & plastic products (3.2%) sub-sectors.

The agriculture sector, which accounts for 5.6% of the economy, declined by 3.7% in 2Q 2026, marking the first contraction since 4Q 2024. This was mainly due to a contraction in the oil palm sub-sector at 9.5%, followed by fishing (-4.4%), and forestry & logging (-10.6%) sub-sectors.

The mining & quarrying sector, which accounts for 5.5% of GDP, rebounded robustly by 9.2% in 2Q 2026, after a 2.1% decline in the previous quarter. This was mainly due to strong expansion in natural gas (19.3%) and other mining & quarrying and supporting (6.7%) sub-sectors.

The construction sector, which accounts for 4.3% of GDP, expanded by 6.5% year-on-year in 2Q 2026. The strong performance was primarily due to growth in specialised construction activities (10.4%) and non-residential buildings (9.6%).

In 2Q 2026, domestic demand grew by 5.1% year-on-year, edged down by 0.1 percentage points from the growth rate in the preceding quarter (table 2).

Private consumption grew by 4.8%, while public consumption rose by 7.6% year-on-year in 2Q 2026.

Meanwhile, gross fixed capital formation increased by 4.6% year-on-year in 2Q 2026, with private and public sector investment growing by 4.3% and 6.3%, respectively. The expansion in gross fixed capital formation was supported by solid investment in machinery & equipment, structures, and other assets.

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In 2Q 2026, the trade surplus surged by 449.2% year-on-year to RM84.0 bln. Exports expanded by 42.4% year-on-year, while imports surged by 25.4% year-on-year.

The federal government's fiscal deficit widened to 5.1% of GDP in 2Q 2026, as the year-on-year increase in revenue (+12.3%) was outpaced by higher operating expenditure (+19.9%) and development expenditure (+18.5%) (table 3). The increase in operating expenditure was mainly driven by a 94.3% surge in subsidies and social assistance, largely due to higher fuel subsidies.

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External debt amounted to RM1,509.7 bln, or 71.6% of GDP as at the end of 2Q 2026 (table 4). Ringgit-denominated debt accounted for 31.5% of total external debt, while the remaining 68.5% was denominated in foreign currency.

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In 2Q 2026, the headline inflation rate rose to 1.9%, mainly driven by higher fuel prices amid the Middle East conflict. Meanwhile, the core inflation rate moderated to 1.9%, reflecting softer inflation in jewellery & watches, as well as rent.

At the end of 2Q 2026, the annual growth rate of the broad money supply (M3) was 6.7%, up by 1.2 percentage points from the growth rate at the end of 1Q 2026. Growth in bank lending increased to 5.5% at the end of 2Q 2026 from 5.4% at the end of 1Q 2026.

The overnight policy rate remained at 2.75% in Jun 2026. As at end Jun 2026, the average base lending rate, 1-month fixed deposit rate, and 12-month fixed deposit rate of commercial banks stood at 6.43%, 1.81%, and 2.00%, respectively.

Malaysia's economy in 2Q 2026 was supported by strong export growth driven by robust demand for electrical and electronics (E&E) products, resilient private consumption underpinned by favourable labour market conditions, and continued growth in private investment (figure 1).

In the second half of 2026, Malaysia's economic growth is expected to continue to be supported by firm domestic demand and strong exports, arising from robust global demand for E&E goods. Growth is expected to be further supported by investment in multi-year projects, and increased inbound tourism activities. However, downside risks, including a prolonged Middle East conflict, a potential economic slowdown among key trading partners, rising cost of living, and lower-than-expected commodity production, may weigh on growth momentum.

i Capital projects Malaysia's real GDP to grow in the range of 5.0% to 6.0% in 3Q 2026, with full year growth forecast at 4.5% to 5.5%.

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