Affin Bank Expects Revival In Malaysia’s Investment Cycle In 2H 2026

KUALA LUMPUR, April 22 (Bernama) -- Malaysia is expected to see a revival in its investment cycle in the second half of 2026 (2H 2026), supported by strong domestic demand despite the West Asia conflict, according to Affin Bank Bhd.

Group chief economist Alan Tan Chew Leong said investment is likely to pick up alongside resilient private consumption, which should help cushion any potential slowdown in exports following uncertainties stemming from the United States-Iran conflict. 

“As a result, Malaysia’s gross domestic product (GDP) growth is likely to remain in the range of 4.5 to 5 per cent, while the government’s fiscal position should remain manageable,” he said during a webinar examining the global and Malaysian implications of the West Asia conflict.

Tan said Malaysia is also benefiting with higher oil prices, which are providing some support to the country’s growth outlook.

“If we look at the sensitivity analysis, for every US$10 increase in oil prices, across key macro indicators such as GDP growth, inflation, the current account and fiscal balance, Malaysia’s GDP is likely to respond positively,” he said.

However, Tan said that from Malaysia’s fiscal perspective, although higher oil prices lead to increased government revenue, this is offset by a higher subsidy bill.

“As a result, some pressure on government finances in the months or even years ahead is expected,” he said. 

Meanwhile, IPPFA Sdn Bhd investment strategy director and country economist Mohd Sedek Jantan said capital markets are also being affected by heightened uncertainty.

“While developed markets have reached new highs, this has influenced capital flows. Although it may appear that emerging markets benefit, in reality, investors are reallocating funds from equities into bonds and fixed income instruments due to uncertainty,” he said.

Mohd Sedek said the evolving situation also poses challenges for monetary policy, particularly if the conflict persists, as central banks may face pressure on whether to raise interest rates or maintain current levels, with either decision potentially weighing on growth.

“Malaysia and other Asian economies are already seeing rising inflation, and if oil prices reach US$100 per barrel, second-round effects could delay or even derail easing cycles for many central banks,” he said. 

-- BERNAMA