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Malaysia’s manufacturing sector expected to sustain growth into 2026

RHB Investment Bank maintained an optimistic view on the sector’s prospects, forecasting IPI growth of 4.1% in 2026. Despite concerns over a global economic slowdown, higher tariffs and geopolitical volatility, industrial activity is expected to remain on a growth trajectory. For the whole of 2025, Malaysia’s IPI expanded by 3.6%, nearly matching the 3.7% increase recorded in 2024.

Kuala Lumpur (VNA) – With stable external demand, continued growth in the domestic consumer market and timely government support policies, Malaysia’s manufacturing sector is expected to maintain its growth momentum into 2026, economists have said.

This optimistic outlook is underpinned by the strong performance of the Industrial Production Index (IPI), which measures output from the manufacturing, electricity and mining sectors toward the end of 2025.

Data from the Department of Statistics Malaysia (DOSM) showed that the IPI in December 2025 rose by 4.8% year on year.

RHB Investment Bank maintained an optimistic view on the sector’s prospects, forecasting IPI growth of 4.1% in 2026. Despite concerns over a global economic slowdown, higher tariffs and geopolitical volatility, industrial activity is expected to remain on a growth trajectory. For the whole of 2025, Malaysia’s IPI expanded by 3.6%, nearly matching the 3.7% increase recorded in 2024.

This steady performance has been driven largely by global demand for electrical and electronic products serving artificial intelligence (AI) development, data centre expansion, 5G deployment, electric vehicles and broader supply chain growth.

However, the research department of MBSB Bank projected a more moderate pace of expansion, estimating IPI growth of around 3% in 2026.

The strong year-end IPI performance has also lifted expectations for Malaysia’s gross domestic product (GDP) growth in 2025 to 4.9%, exceeding earlier forecasts of 4.0–4.8% but slightly below the 5.1% growth recorded in 2024.

Looking ahead to 2026, economists expected the manufacturing sector to remain a key driver of economic growth. Nevertheless, they cautioned that the outlook will depend heavily on geopolitical developments and external economic conditions, including tighter trade regulations, higher tariffs and the risk of weakening global demand./.

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