KUALA LUMPUR: Malaysia has showed notable economic resilience despite global trade tensions and policy uncertainty, the International Monetary Fund (IMF) said.
This was disclosed in the IMF's 2026 Article IV Consultation discussions with Malaysian authorities.
Led by Masahiro Nozaki, the IMF team highlighted that Malaysia's economy grew at a healthy pace in 2025, underpinned by robust domestic consumption and investment, solid employment gains, and a global tech-sector upcycle.
"The strong performance in part reflects sound economic policies - the authorities have maintained prudent macroeconomic and financial policies. The October 2025 Malaysia-US trade deal has helped to reduce uncertainty for businesses and consumers in Malaysia.
"Nonetheless, the global landscape has shifted, with global uncertainty becoming a new normal. Against this backdrop, rebuilding Malaysia's macroeconomic buffers remains critical," he said in a statement.
Nozaki said Malaysia's economic resilience is expected to continue in the near term, supported by strong domestic demand.
The IMF staff projects growth to slow marginally from 4.6 per cent in 2025 to 4.3 per cent in 2026, mainly reflecting the impact of higher US tariffs on Malaysia.
Risks are tilted to the downside and include global protectionist measures, financial market volatility, and potential shocks from the artificial intelligence (AI) sector.
Upside potential remains, however, from stronger-than-expected tourism, progress in global trade negotiations, and faster structural reform implementation.
The IMF also praised Malaysia's fiscal management, noting the 2023 Public Finance and Fiscal Responsibility Act and the steady reduction of the fiscal deficit since 2022.
The government aims to reduce the fiscal deficit to 3.5 per cent of gross domestic product (GDP) in 2026 and 3.0 per cent by 2028.
Federal debt stood at 64.6 per cent of GDP at end-2024, above pre-pandemic levels, highlighting the importance of continued fiscal discipline and transparency.
Inflation averaged 1.4 per cent during January-October 2025 and is expected to stabilise near its long-term two per cent average.
The IMF views the current monetary policy stance as appropriate, emphasising that future policy should remain data-driven to maintain price stability and support growth.
Exchange rate flexibility and deepening of the foreign exchange market are welcomed, it remarked.
The fund noted that systemic financial risks remain contained, with banks maintaining strong capital and liquidity, stable corporate and household balance sheets, and a stable housing market.
It added that vigilance is recommended for potential vulnerabilities, including household leverage and bank exposures affected by US tariffs.
The fund also highlighted the importance of structural reforms under the 13th Malaysia Plan, including labour market reforms, increasing female labour participation, and deeper Asean trade and financial integration to sustain domestic-driven and inclusive growth.
