Small Medium Enterprise Development Bank Malaysia Berhad (SME Bank) expects Bank Negara Malaysia (BNM) to maintain the Overnight Policy Rate (OPR) at 2.75% throughout 2026, providing a stable monetary environment to support Malaysia’s economic expansion, according to its latest Malaysia Economic Outlook 2026 report.
The report projects Malaysia’s gross domestic product (GDP) to grow by 4.3% in 2026, underpinned by resilient domestic demand and sustained activity among micro, small and medium enterprises (MSMEs), despite heightened global uncertainties stemming from rising protectionism and ongoing geopolitical tensions.
SME Bank said domestic growth momentum is expected to remain intact, supported by continued policy measures aimed at cushioning the economy from external headwinds. The outlook is broadly aligned with projections by the Ministry of Finance Malaysia, the International Monetary Fund and the World Bank.
SME Bank Relief President and Chief Executive Officer Samad Majid Zain said MSMEs will continue to play a central role in sustaining Malaysia’s economic resilience.
“Malaysia’s growth outlook for 2026 remains resilient, driven by the strength of MSMEs in sustaining domestic demand, employment and productivity,” he said. “The National Budget 2026 reinforces this momentum with RM50 billion in financing and guarantee facilities, with SME Bank entrusted to implement nearly RM2 billion in strategic national initiatives to support MSME scaling, technology adoption and productivity enhancement across priority sectors.”
He added that these initiatives are aligned with BNM’s Performance Measurement Framework and the government’s MADANI economic framework.
According to the report, the services sector is expected to be the main growth stabiliser, supported by resilient household consumption. This is underpinned by accommodative monetary and fiscal policies, including higher allocations for Sumbangan Asas Rahmah, Sumbangan Tunai Rahmah and the Phase 2 civil servant salary adjustments, which are expected to help ease cost pressures and sustain consumer spending.
In contrast, the manufacturing sector faces heightened exposure to external risks, with 67.1% of the Industrial Production Index being export-oriented, making it more vulnerable to shifts in global demand and trade policy developments. Construction activity is expected to normalise following two years of strong post-pandemic growth driven by infrastructure and private sector projects, while the mining sector is projected to remain subdued amid moderating demand from key importing economies and lower global crude oil prices.
On inflation, SME Bank projects consumer price growth to rise moderately to 1.7% in 2026, remaining at a manageable level.
Head of Economic Research Mazlina Abdul Rahman noted that headline inflation averaged 1.4% year-on-year for the first 11 months of 2025, compared with 1.9% in the corresponding period in 2024, before edging higher from July 2025 following the expansion of the Sales and Service Tax to additional service sectors, selected non-essential goods and utility tariff adjustments.
“Looking ahead, lower Brent crude oil prices, expectations of a stronger ringgit compared to the 2025 average and the absence of further fuel subsidy rationalisation this year should help keep inflation in check,” she said.