Serc | SERC

Policy uncertainties remain. The high frequency indicators showed a mixed bag of performance, indicating continued slowing global expansion in Q2 and 2H 2025, supported by positive labour market conditions, front-loading trade activities, less restrictive monetary policy and fiscal stimulus.
The US Fed Reserve’s interest rate path in focus. Global monetary easing is underway though at varying pace as central banks move from restrictive to neutral policies on a gradual moderation in inflation on a global scale.
Key risks to global outlook in 2025-2026 are elevated uncertainty and trade barriers as well as geopolitical conflicts could disrupt trade, energy supplies, investment flows and causes volatilities in global financial markets and commodity market. Rising public debt and fiscal imbalances in the US may limit policy flexibility and increase sovereign risk premiums. Renewed inflationary pressures could derail plans for monetary easing, prolong tightening cycles and increase borrowing costs.

B. MALAYSIA ECONOMIC OUTLOOK UPDATE

Malaysia Must Strengthen Economic Resilience

Economic growth sustained in 1H 2025. Amid the slowing growth momentum, advance estimate for Malaysia’s real GDP showed a 4.5% yoy growth in Q2.
Slowing growth momentum in 2H 2025. With the US tariffs uncertainty weighing on exports, we expect the economic growth to slow in 2H 2025, averaging between 3.5% and 4.0% yoy, largely anchored by domestic demand, though at a slower pace.
Cautious discretionary consumer spending is becoming more prevalent due to rising cost of living pressure and the expanded Sales and Service Tax (SST) implementation. Burdened with multi-costs increases, businesses would pass increased costs onto consumers through higher prices of goods and services. However, positive labour market conditions and moderate wage growth, lower interest rate, and continued higher amount of Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (SARA) totalling RM15.0 billion would aid consumption of the low-income households.

The 13th Malaysia Plan (2026-2030) (13MP)

Overall, the plan is only as good as its implementation. The implementation of national development initiatives and strategies require credible institutions and a commitment to political reforms to succeed as these reforms are essential for establishing good governance, fostering economic growth, and ensuring equitable outcomes.
Strong, effective, and accountable institutions are crucial for societal well-being as they enhance public efficiency, combat corruption, and improve the capacity to address global and domestic challenges.
Effective implementation is crucial. Evidence-based monitoring and evaluation is, therefore, a cornerstone of good development planning and effective implementation. It is essential to consistently monitor our progress and proactively identify any unexpected challenges or obstacles that could impede our progress.
Good governance and accountability is another important factor in the implementation of development plan. Effective governance is the bedrock of sustainable development. It revolves around the optimisation of our limited resources; the prioritisation of resources or the order in which to implement our priorities to achieve the outcomes.

The National Budget 2026’s Priorities