• Key policy rate: 2.75% (January 2026)
• Q4 2025 GDP growth rate: 6.3%; full-year 2025: 4.9% 
• Manufacturing Purchasing Managers’ Index reading: 50.2 (January 2026)
• Inflation rate: 1.6% (December 2025) 

Malaysia’s economy is firing across all cylinders, with both public and private investments recording double-digit increases in the past year.

The services sector accounts for nearly 60 per cent of Malaysia’s GDP, benefiting from a young and literate population where the median age is 31. This is followed by the industrial sector that accounts for one-third of the domestic economy, led by a particularly upbeat construction sector that expanded by 12.4 per cent in 2025. Agriculture accounts for roughly 6 per cent, with its top product being palm oil.  

By expenditure, household spending – which accounts for about 60 per cent of Malaysia’s GDP – continues to grow to match its pre-pandemic pace. Growth is driven largely by capital investments, which climbed by 12 per cent in 2024 per government data. Government expenditures have also picked up over the past year on the back of continued fuel and electricity subsidies and higher salaries paid to civil servants, both supporting a more vibrant private consumption by leaving households with more disposable income.

On the monetary policy front, Malaysia’s central bank has reduced the key interest rate in July 2025 after a two-year pause amid manageable inflation that has stayed below 2 per cent from 2024-2025. Low interest rates support rapid economic expansion for Malaysia, although some political uncertainty in light of corruption allegations could keep investors nervous.

House view: Lundgreen’s sees Malaysia, along with its Southeast Asian peers, to be among leaders of global growth in the years to come. The country is able to attract foreign investments into the country given its low-inflation, high-growth environment and with the help of government stimulus programs in key sectors like manufacturing.

Updated as of 2 February 2026