Malaysia’s economy grew by 6% in the second quarter of the year, driven by sustained domestic demand and a strong export sector, says Bank Negara Malaysia (BNM).

The central bank said household spending was supported by a steady growth in income and policy support, while investment growth was backed by continued spending on structures and machinery and equipment.

Export growth was largely driven by the electrical & electronics (E&E) and services sectors, as well as rebounds in exports of liquefied natural gas and non-E&E manufacturing products.

Gross imports meanwhile expanded further thanks to robust growth in intermediate and consumer goods imports.

“The Malaysian economy remains on firm footing. Growth in 2026 is projected to remain within the forecast range of 4% to 5%, with recent developments indicating that overall growth could be around 5%.

“While the outlook continues to be shaped by external developments, Malaysia is well-positioned to navigate these challenges from a position of strength and policy readiness,” said BNM governor Abdul Rasheed Ghaffour.

BNM said headline inflation rose to 1.9% from 1.6% in the first quarter of the year, but core inflation moderated to 1.9% compared with 2.1% in the preceding quarter.

It attributed the headline inflation increase to higher external cost pressures due to the ongoing Middle East conflict, which impacted fuel prices, particularly for RON97 and diesel.

The central bank said the ringgit remained largely stable against the currencies of major trading partners, thanks to strong domestic fundamentals and sustained growth momentum.

“Moving forward, while external factors will continue to drive exchange rate movements, Malaysia’s firm economic prospects and ongoing structural reforms are expected to provide enduring support to the ringgit.”

BNM said financing remains available to boost economic activity and business needs, while financial institutions continue to support small and medium-sized enterprises (SMEs) facing temporary financial struggles.

“Repayment assistance, financing restructuring and tailored advisory services remain available to affected SMEs. They can also obtain assistance through the Credit Counselling and Debt Management Agency’s small debt resolution scheme.

“Targeted support is also available for viable SMEs affected by disruptions arising from the conflict in the Middle East via the SME Stabilisation Relief Facility.

“In addition, SMEs can make use of the RM10 billion BNM-CGC Guarantee Scheme to strengthen resilience and competitiveness for the future.”

The central bank projected headline inflation to average between 1.5% and 2.5% for the whole year, with indicators pointing to modest consumer price increases.

While the Middle East conflict may continue to contribute to external cost pressures, it said its overall impact on inflation would likely remain contained.

“In particular, domestic policy measures such as targeted fuel subsidies, together with stable demand conditions, are expected to help limit the pass-through of higher global costs to domestic prices.”