Summary

• Malaysia’s economy opened 2026 on solid footing, with 1Q2026 gross domestic product (GDP) advance estimates expanding by 5.3%, anchored by services (5.4%) and an accelerating manufacturing sector (5.8%). External trade reinforced this momentum, with March exports reaching RM148.8 billion (+8.3%), driven by electrical and electronics (E&E) products (+15.0%). However, the full macroeconomic impact of the Iran conflict, which only had approximately one month to influence 1Q data, has yet to materialise, and growth is expected to moderate as energy price shocks, supply chain disruptions, and elevated freight costs feed through. MARC Ratings projects full-year 2026 GDP growth to taper to 4.4%.
• March inflation printed at 1.7%, remaining below 2.0% for the 31st consecutive month due to subdued core components. However, the closure of the Strait of Hormuz is driving up underlying energy costs, already reflected in a 2.1% month-on-month increase in transport inflation, which significantly outpaced other CPI components, most of which were broadly flat. Anticipating these costs to cascade into secondary price effects, MARC Ratings forecasts full-year inflation to reach 2.1%. To cushion the impact, the government has raised the monthly BUDI Diesel assistance to RM400 from RM300.
• The ringgit appreciated by 2.4% month-to-date as of 28 April to 3.95 USDMYR, the second-strongest spot return among regional currencies, partially reversing March’s 4.1% depreciation following the 7 April Pakistan-brokered conditional US–Iran ceasefire. Late-month re-escalation has capped further appreciation, with the currency now trading at the stronger end of MARC Ratings’ range of 3.92 to 4.07 USDMYR.
• Foreign bond inflows reached a 10-month high of RM6.1 billion in March, reversing February’s RM2.5 billion outflow, with foreign holdings of govvies rising to 21.6%. As of 28 April, Malaysian Government Securities (MGS) yields bull-steepened month-to-date, declining by 5 to 12 basis points (bps) across the benchmark curve, with the 10-year yield closing at 3.55%.
• Global bond markets were mixed month-to-date as of 28 April. US Treasury yields edged higher between 0 and 3 bps, after the increased expectations of a prolonged war, while the Fed held the upper bound of the federal funds rate at 3.75% in April. The German Bund curve steepened, with the 2-year remaining unchanged, while the 30-year rose 11 bps on eurozone fiscal and inflation concerns. Meanwhile, Chinese government bonds (CGBs) bull-flattened, with the 30-year and 10-year yields rallying 9 and 4 bps, respectively, amid subdued inflation.