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A. WORLD ECONOMIC OUTLOOK UPDATE
Defying Gravity?
- The year 2025 was the end of the beginning. The global economy has performed much better than feared, cruising at a soft speed estimated 3.1% in 2025 (3.3% in 2024) as the impact of the US Liberation Tariffs and heightened uncertainties on growth and supply chains have been limited thus far amid the persistence of geopolitical tensions.
- Looking ahead to 2026, with so many moving parts in the global and domestic economy, will the world economy in 2026 continue to remain resilient, continued transition or disruption?
- Geopolitical risks remain significant, driven by new rules in trade and investment, with the US and China being two strategic rivals of current global fragmentation, particularly in trade, technology, and governance, leading to competing economic and political blocs as well as supply chains security.
- The real impact of a shift in trade policy and economic policy uncertainty on the global economy, trade and investment flows will become clearer in 2026. Trade conflicts, increasing populist policies, and intense focus on securing critical raw materials for technology, advances in AI and green transitions would trigger potential market volatility in the years ahead.
B. MALAYSIA ECONOMIC OUTLOOK UPDATE
Charting Malaysia Outlook 2026 – Resilience and Adaptability
- The year 2025 ended with the impact of heightened external uncertainties emanating from the US Reciprocal Tariffs and ongoing geopolitical conflicts on global growth being limited and lower than expected.
- Against the backdrop of a global economy performing better than feared, the Malaysian economy has demonstrated resilience to achieve an estimated 4.7% for the full year of 2025, though it has moderated from 5.1% in 2024.
- Looking ahead to 2026, with so many moving parts in the global and domestic economy, what will define the year 2026? The net impact of a shift in trade policy and economic policy uncertainty on the global economy, trade and investment flows will become more apparent in 2026.
- We expect continued global economic expansion, estimated 3.0% in 2026, supported by easing trade uncertainty, lower energy prices, a further cautious pace of monetary easing against inflation risk and easier financial conditions.