IMF Executive Board Concludes 2026 Article IV Consultation with Malaysia
IMF News, February 27, 2026
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- Published: February 27, 2026
Overview
- On February 20, 2026, the Executive Board of the International Monetary Fund (IMF) completed the Article IV Consultation for Malaysia.
- Staff’s estimate of Malaysia’s GDP growth in 2025: 4.9 percent; subsequent national accounts data released on February 13, 2026 show that Malaysia’s GDP growth in 2025 was 5.2 percent.
- Press Release No. 26/065.
Economic performance in 2025
- Real GDP growth (2025): 4.9 percent (staff estimate as of January 22, 2026); national accounts data released February 13, 2026 show 5.2 percent.
- Average headline inflation (2025): 1.4 percent.
- Fiscal consolidation progress: fiscal deficit estimated reduced from 4.1 percent of GDP in 2024 to 3.8 percent of GDP in 2025 under the Public Finance and Fiscal Responsibility Act.
- Monetary policy: Bank Negara Malaysia (BNM) reduced the Overnight Policy Rate to 2.75 percent in July 2025 and kept it unchanged since then.
- Policy framework: authorities’ 13th Malaysia Plan (released July 2025) emphasizes fiscal discipline and stronger governance, and promotes social mobility, affordable housing, health and pension reform, and resilience against climate shocks.
Outlook and risks (near term)
- Growth projection (2026): 4.6 percent.
- Inflation projection (2026): 1.9 percent.
- Growth drivers: strong domestic demand and a global tech-sector upcycle; near-term resilience expected.
- Downside risks to growth: escalation in protectionist trade measures, global financial market volatility, potential bust of the AI boom.
- Upside risks: breakthroughs in global trade negotiations, faster implementation of structural reforms.
- Inflation risks: assessed as balanced.
Executive Board assessment — summary of Directors' views
- General view: Directors commended notable resilience of Malaysia’s economy against global uncertainty; growth expected to be supported by strong domestic demand; inflation projected to remain low and stable.
- Risks: Directors agreed that risks to growth are tilted to the downside, stemming mainly from external factors, though upside risks can also materialize.
- Fiscal policy:
- Directors welcomed steady progress with fiscal consolidation under the Public Finance and Fiscal Responsibility Act.
- General encouragement to reduce the fiscal deficit further to 2.5 percent of GDP by 2028, anchored by high-quality and sustainable revenue and expenditure measures.
- Some Directors assessed that the authorities’ consolidation strategy is already well calibrated.
- Monetary and external policy:
- Directors agreed current monetary policy stance is appropriate and should stay data-dependent to continue to anchor inflation expectations and preserve growth.
- Welcomed efforts to deepen the foreign exchange market and build reserves.
- Agreed on importance of preserving exchange rate flexibility; alongside strengthening social safety nets and implementing structural reforms, this would help reduce external imbalances.
- In the event of an adverse shock, a risk-off event could warrant the use of foreign exchange intervention to ease policy trade-offs.
- Financial sector:
- Directors concurred that systemic financial sector risks remain contained.
- Noted banks maintain ample capital and liquidity buffers, household balance sheets are healthy, and the housing market remains stable.
- Emphasized continued vigilance against pockets of vulnerabilities, such as highly leveraged households.
- Policy response to shocks:
- Directors encouraged authorities to stand ready to respond agilely to possible external shocks.
- In an adverse shock, fiscal policy should cushion negative impact on vulnerable households and affected firms; any monetary policy response would depend on implications for inflation and output.
- If upside risks materialize, authorities should use the opportunity to build macroeconomic buffers.
- Structural reforms:
- Swift implementation of structural reforms under the 13th Malaysia Plan is key for further domestic-driven and inclusive growth.
- Labor market reforms to increase wages, reduce skill-related underemployment, and raise female labor force participation were emphasized.
- Deeper trade and financial integration within ASEAN can boost Malaysia’s growth potential.
Key statistics and projections (selected)
- Nominal GDP (2024): US$422.2 billion
- Population (2024): 34.1 million
- GDP per capita (2024, current prices): US$12,397
- Poverty rate (2022, national poverty line): 6.2 percent
- Unemployment rate (2024): 3.2 percent
- Adult literacy rate (2022): 96.0 percent
- Main goods exports (share of total exports, 2024):
- Machinery and Transport Equipment: 45.6 percent
- Manufactured Goods and Miscellaneous Manufactured Articles: 20.4 percent
- Mineral Fuels, Lubricants etc.: 14.4 percent
- Selected macro indicators (annual)
- Real GDP growth: 2024: 5.1; 2025: 4.9; 2026: 4.6; 2027: 4.3
- Total domestic demand growth: 2024: 4.7; 2025: 4.4; 2026: 4.2
- Federal government overall balance (percent of GDP): 2024: -4.1; 2025: -3.8; 2026: -3.5; 2027: -3.2; 2028: -3.0
- Revenue (percent of GDP): 2024: 16.8; 2025: 15.9; 2026: 15.7
- Expenditure and net lending (percent of GDP): 2024: 20.9; 2025: 20.1; 2026: 19.4
- Federal government non-oil primary balance (percent of GDP): 2024: -4.7; 2025: -3.9; 2026: -2.8; 2027: -2.4
- General government debt (percent of GDP): 2024: 69.8; 2025: 70.0; 2026: 69.5; 2027: 68.6
- CPI inflation, annual average: 2025: 1.4; 2026: 1.9
- Overnight policy rate: 2024: 1.75; 2025: 2.75; 2026: 3.00
- Balance of payments and reserves
- Current account balance (US$ billions): 2024: 8.2; 2025: 9.6; 2026: 11.8
- Gross official reserves (US$ billions): 2024: 116.2; 2025: 125.5; 2026: 130.9
- Total external debt (US$ billions): 2024: 304.4; 2025: 324.1; 2026: 340.8
Source: IMF Communications Department — IMF Executive Board Concludes 2026 Article IV Consultation with Malaysia (Press Release No. 26/065).