IMF Staff Completes the 2026 Article IV Mission to Malaysia

IMF News, December 19, 2025

Source details

IMF team led by Mr. Masahiro Nozaki conducted the 2026 Article IV Consultation discussions with Malaysian authorities and stakeholders from December 8-19, 2025.
Statement issued at the conclusion of discussions conveys IMF staff’s preliminary findings; views are those of IMF staff and do not necessarily represent the IMF’s Executive Board.
The October 2025 Malaysia-U.S. trade deal helped reduce uncertainty for businesses and consumers in Malaysia.

Malaysia has shown notable resilience against global trade tensions and policy uncertainty, with growth supported by:
- strong domestic consumption and investment,
- solid employment growth,
- a global tech-sector upcycle.
IMF staff projections and near-term outlook:
- Growth projected to slow from 4.6 percent in 2025 to 4.3 percent in 2026, mainly reflecting the impact of higher U.S. tariffs on Malaysia.
- Inflation averaged 1.4 percent during January-October 2025 and is projected to remain stable and gradually return to its long-term average of 2 percent.
Risks to growth are tilted to the downside and stem mainly from external factors:
- escalation of protectionist trade measures,
- global financial market volatility,
- potential bust of the AI boom.
Upside risks include:
- breakthroughs in global trade negotiations,
- stronger-than-envisaged tourism activities,
- faster implementation of structural reforms.

Fiscal achievements and targets:
- Passage of the Public Finance and Fiscal Responsibility Act in 2023 demonstrates commitment to prudent fiscal management.
- Authorities plan to reduce the fiscal deficit to 3.5 percent of GDP in 2026 and to 3.0 percent of GDP by 2028.
Public debt:
- Federal government debt was 64.6 percent of GDP at end-2024, still above pre-pandemic levels.
Policy guidance:
- Rebuilding macroeconomic buffers remains critical given elevated global uncertainty.
- Continue fiscal consolidation with further high-quality and sustainable revenue and expenditure measures.
- Strengthen fiscal transparency and spending efficiency, including implementation following the new Government Procurement Act.

Inflation and monetary stance:
- Inflation averaged 1.4 percent during January-October 2025; projected to return gradually to the long-term average of 2 percent.
- Staff assesses the current monetary policy stance as appropriate.
Policy guidance:
- Monetary policy should remain data-dependent to anchor inflation expectations and preserve growth amid heightened global uncertainty.
- Continue commitment to exchange rate flexibility and efforts to deepen the foreign exchange market.

Systemic risks:
- Systemic financial sector risks remain contained.
- Malaysian banks maintain ample capital and liquidity buffers.
- Corporate and household balance sheets are healthy; the housing market remains stable.
Vulnerabilities to monitor:
- Highly leveraged households,
- Banks’ exposure to firms affected by the U.S. tariffs,
- Linkages between banks and non-bank financial institutions.
External funding:
- Banks’ external funding risks remain contained and are mitigated by holdings of ample foreign currency assets, but continued monitoring is warranted given elevated global financial market risks.

Swift implementation of structural reforms under the 13th Malaysia Plan (13MP) for 2026-30 is key to boosting domestically driven and inclusive growth.
Priority reforms and areas of focus:
- Labor market reforms to increase private sector wages, reduce skill-related underemployment, and raise female labor force participation.
- Deeper trade and financial integration within ASEAN to boost long-run growth potential.
Staff welcomes ongoing efforts and recommends accelerated implementation to realize growth and inclusion objectives.

The IMF team thanked officials of the Government of Malaysia, Bank Negara Malaysia, other public institutions, and private sector representatives for productive discussions.

IMF Press Release No. 25/430 — December 19, 2025.