Summary

• The US continues to outperform most advanced economies, supported by artificial intelligence (AI)-led investment, resilient domestic demand and structural advantages that reinforce US exceptionalism. Meanwhile, China remains on track to achieve its revised growth target despite persistent weakness in domestic demand, supported by industrial upgrading, advanced manufacturing and resilient exports.
• Malaysia’s economy has continued to outperform expectations, with gross domestic product (GDP) expanding by 5.4% in 1Q2026 and 5.8% in 2Q2026 (advance estimate). Resilient domestic demand, sustained implementation of major investment projects and exceptionally strong export performance have placed the economy on a firmer growth trajectory. Thus, MARC Ratings has upgraded its GDP growth forecast to 5.1% from 4.4% previously.
• MARC Ratings expects the ringgit to trade within the 4.00–4.15 USDMYR range by end-2026, revised from the prior forecast of 3.98–4.07 USDMYR before the shift in Federal Reserve (Fed) rate expectations, reflecting a wider Malaysian Government Securities – US Treasury (MGS–UST) yield differential in favour of the US. Nevertheless, record-high exports and sustained foreign direct investment inflows should continue to provide support to the currency. Of note, the ringgit was broadly stable in 1H2026 and ranked as the second-best performing currency among major Asian peers in 1H2026, trailing only the Chinese yuan.
• Malaysia is expected to continue attracting foreign bond inflows in 2H2026, supported by stable domestic fundamentals and ongoing institutional reforms. Nevertheless, expectations of at least one Fed rate hike by December 2026 and wider MGS–UST yield differentials in favour of US assets may moderate the pace of inflows. Even so, MGS yields are expected to remain broadly stable within the 3.60%–3.70% range by end-2026.
• On the monetary policy front, MARC Ratings’ baseline expectation is for the Overnight Policy Rate (OPR) to remain unchanged. However, ongoing geopolitical risks could keep oil prices elevated and pressure inflation. Additionally, amid strong GDP growth, a reversion to the OPR level that prevailed before the July 2025 pre-emptive rate cut may be considered over time.