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KUALA LUMPUR - Malaysia's economy grew 5.4% in the first quarter from a year earlier, slightly above expectations, with firm domestic demand and strong fundamentals helped to offset economic shocks arising from the Middle East conflict, government and central bank data showed on Friday.
Economists surveyed by Reuters and advance estimates released by the government had forecast annual gross domestic product growth would come in at 5.3% in the January to March period, slowing from 6.3% in the final quarter of 2025.
The expansion in the first quarter was driven by sustained household spending, steady investments and continued export growth, according to the statistics department and Bank Negara Malaysia.
"At this point, the impact on the Middle East conflict on Malaysia is successfully contained as the economy enters this period from a position of strength supported by strong fundamentals," BNM Governor Abdul Rasheed Ghaffour said at a press conference. In March, the central bank slightly raised its growth forecast for 2026 to a range of 4% to 5%, from an earlier projection of 4% to 4.5%, supported by household spending, steady exports and tourism. The economy expanded 5.2% last year, surpassing expectations as the country posted record trade and approved investments. BNM kept its benchmark interest rate unchanged at 2.75% for a fifth consecutive meeting earlier this month, saying its monetary policy stance was appropriate in the current environment of price stability and sustainable economic growth.
However, the central bank warned of risks to domestic growth and inflation, saying uncertainty over the duration and severity of the war in Iran could weigh on its outlook.
Malaysia's headline and core inflation averaged 1.6% and 2.1% respectively in the first quarter of 2026, the central bank said.
Inflation was expected to edge higher in 2026 though price pressures have remained relatively contained as of early May, Abdul Rasheed said.
(Reporting by Rozanna Latiff and Ashley Tang; Editing by David Stanway)
