Tong's Portfolio: Malaysia's economy grows faster than expected, but people don't feel it. Why?

MALAYSIA, 20 SEPTEMBER 2026 —

Malaysia’s economy grew 6 % year‑on‑year in the second quarter of 2026, outpacing Singapore’s 5.9 % and Indonesia’s 5.3 % growth, The Edge Malaysia reported.

Net exports drove almost 40 % of the 6 % GDP rise, surging 168.5 % year‑on‑year to RM15.8 billion, The Edge noted. The jump reflects higher demand for semiconductors linked to artificial‑intelligence data centres and stronger liquefied natural gas (LNG) shipments amid global energy disruptions.

However, the surge partly reflects a low base: net exports fell to RM5.9 billion in the same quarter of 2025, less than half the RM12.5‑21.5 billion recorded in the other three quarters of that year, the report added.

Private consumption, which accounts for roughly 60 % of GDP, rose 4.8 % year‑on‑year in the quarter, only marginally above the 4.7 % gain in the previous quarter but below the 5.5 % average recorded in 2025 and far short of the 7.7 % pre‑pandemic pace, The Edge said. Private sector capital formation slowed sharply to 4.3 % in the quarter after averaging 10.9 % over the prior two years.

Public sector investment growth eased to 6.3 % year‑on‑year, down from an average of 10.9 % in 2024‑25, as major infrastructure projects near completion, the publication reported. Conversely, public consumption accelerated to 7.6 % year‑on‑year, driven by higher spending on supplies, services and civil‑servant pay rises, which helped lift overall GDP.

Sectoral data show that manufacturing and mining supplied most of the momentum. Electronics manufacturing expanded 17 % year‑on‑year, while natural gas output grew 19.3 % year‑on‑year, The Edge highlighted. By contrast, wholesale and retail trade, accommodation and food‑and‑beverage services together grew 4.8 % year‑on‑year, down from a 5.8 % average in 2025 and well below the 7.5 % growth seen in 2019.

Construction slowed to 6.5 % year‑on‑year from 12.2 % in 2025, with the slowdown concentrated in residential and civil‑engineering subsectors.

The growth‑heavy sectors employ only 10.7 % of the workforce. Between Q4 2023 and Q2 2026, total employment rose 3.5 %, while jobs in electronics and information‑communications grew 2.9 % and 3.2 % respectively, and mining employment fell 1.1 %, according to the report. In contrast, labour‑intensive sectors such as wholesale, retail, accommodation and food‑and‑beverage added 6 % of jobs over the same period, accounting for nearly half of the net employment gain.

The mismatch between sectoral output and job creation helps explain why many Malaysians feel the economy is not improving. Although the CPI is low, its basket is weighted toward housing, utilities and transportation, where price changes may not reflect everyday expenses, The Edge observed.

For investors, the concentration of growth in electrical‑electronics and mining narrows opportunities on Bursa Malaysia. Semiconductor firms have benefited from AI‑driven demand, lifting the Bursa Malaysia Technology Index, the source said.

Policymakers face a trade‑off: sustaining export‑led growth while broadening the base to labour‑intensive domestic sectors. Without such a shift, the gap between headline GDP figures and household livelihoods is likely to persist, The Edge concluded.

Related: Malaysia