Kuala Lumpur (Jan 19) - Economists anticipate that Bank Negara Malaysia (BNM) will keep the overnight policy rate (OPR) unchanged at its upcoming January meeting, following a stronger-than-expected estimate for economic growth in the fourth quarter of 2025 (4Q2025).
In a research note released on Monday, CIMB Investment Bank Bhd referred to the Department of Statistics Malaysia’s advance estimate showing that GDP expanded by 5.7% year-on-year in 4Q2025, bringing full-year economic growth for 2025 to 4.9%.
In light of this positive surprise, CIMB revised its GDP growth projection upward to 4.4%, from an earlier estimate of 4.1%. The research house said this stronger performance supports the view that BNM can maintain a stable monetary policy stance through 2026, as growth is expected to moderate while inflation remains contained.
CIMB maintained its outlook for a steady OPR, citing limited demand-driven inflation pressures, helped by the strength of the ringgit and increased productive capacity in the economy. Its economists forecast inflation to average 1.5% year-on-year in 2026, noting that energy prices and input costs remain low, with no clear signs of mounting inflationary pressure.
They also observed that inflation risks are limited following the excise duty increase on alcohol and tobacco implemented in November, and expect no further changes to government-controlled prices.
According to CIMB, the stronger-than-expected economic performance in 4Q2025 was broad-based. Growth was led by the services sector, supported by wholesale and retail trade, transportation and storage, as well as food and beverage services and accommodation. The construction sector also continued to perform well, driven mainly by non-residential projects and specialised construction activities.
Looking ahead, CIMB expects economic growth in 2026 to be driven primarily by the services sector, underpinned by domestic demand, the second phase of civil servant salary adjustments, government cash assistance programmes such as SARA and STR, and tourism-related activities linked to Visit Malaysia 2026. This momentum is expected to be partially offset by a slowdown in manufacturing, particularly due to weaker external demand for non-electrical and electronics exports.
Public Investment Bank Bhd shared a similar assessment, noting that GDP growth in the fourth quarter was supported across major sectors, including services, manufacturing and construction. It highlighted services as the main growth engine, followed by manufacturing and construction.
The firm added that the stronger fourth-quarter showing introduces a modest upside risk to its full-year 2025 GDP forecast of 4.7%, with growth potentially reaching 4.9% if economic momentum carries through to year-end, even as expansion is expected to ease in 2026.
For Sabahans, a stable OPR could help keep borrowing costs manageable for households and businesses, while continued growth in services, construction and tourism supports job opportunities and income stability across the state, particularly as tourism-related activities pick up under Visit Malaysia 2026.