HSBC raised its forecast for Malaysia's 2026 economic growth to 5.5% from 5.2% on Friday, 30 October, after the country's advance third-quarter estimate beat expectations. The bank's research division cited resilient domestic demand and a surge in electronics exports, according to reporting of its research note.
The upgrade followed an advance estimate of 5.3% year-on-year growth for the third quarter, which beat a market consensus of about 5.1%. HSBC also raised its fourth-quarter forecast to 5.3% from 4.7%, suggesting it expects momentum to continue through the end of the year. A forecast is an estimate, not a result, and it can change as new data arrive.
What drove the upgrade
HSBC Asean Senior Economist Yun Liu said Malaysia's growth engine showed few signs of slowing, with private consumption and investment continuing as the main pillars of growth. More detail from the expenditure breakdown of gross domestic product is due in the final release of third-quarter GDP on 18 November, which will test that reading.
Electronics exports linked to artificial intelligence demand were a second driver. Reporting of the HSBC note put AI-related electronics export growth at 60% year on year on a three-month moving average. That figure describes a reported export trend, not a claim that every Malaysian exporter benefited equally.
If the full-year forecast is realised, HSBC's framing would make 2026 the fastest annual expansion since the 8.7% post-pandemic rebound in 2022. Excluding that rebound, it would be the strongest year since 2017, when growth was about 5.9%. Both comparisons depend on the forecast holding, and on final GDP data confirming the advance estimate.
Inflation and the rate outlook
Headline inflation averaged 1.8% in the first nine months of 2026, while core inflation remained around 2% on HSBC's reported figures. Subsidies, including RON95 petrol priced at RM1.99 per litre with a monthly quota of 300 litres, were cited as a factor containing price pressures even as growth stayed strong. Malaysia's September inflation rate alone was also reported at 1.8%, down from 1.9% in August.
That combination shapes HSBC's rate view. The bank expects Bank Negara Malaysia to hold the overnight policy rate at 2.75% at its 5 November meeting. That view is shared by other research houses: Kenanga Investment Bank Research expects BNM to hold at 2.75% on 5 November, and DBS Group Research also expects a hold at the final 2026 meeting, with normalisation delayed until the first half of 2027.
HSBC also expects a possible 25-basis-point increase in the first quarter of 2027, taking the rate to 3%. It described that move as a pre-emptive step towards policy normalisation rather than a response to rising inflation. Kenanga holds a similar view, expecting a 25-basis-point increase to 3% in the first quarter of 2027. Those are forecasts of future decisions, not decisions Bank Negara has taken.
Why the rate call matters for markets
A hold in November, followed by a possible early-2027 increase, would keep Malaysia's policy path distinct from central banks already cutting rates. For currency traders, the rate gap is one factor in ringgit moves, but it does not determine daily moves on its own. Risk appetite, trade data, and expectations for future decisions also matter, as seen in BullBuzz's coverage of the ringgit's recent gains against the dollar.
The same distinction applies to the Federal Reserve, where BullBuzz covered an October hold with two dissents seeking a hike, and to Japan, where BullBuzz covered the Bank of Japan holding at 1.25% in a split vote. Comparing policy paths is useful, but a forecast from one bank does not settle what any central bank will do next.
HSBC's own recent results provide context for the bank behind the forecast, but they are a separate story from this GDP call. BullBuzz covered HSBC's third-quarter results, including a rise in profit and a planned buyback. The GDP upgrade should be judged on the growth and inflation data, not on the bank's earnings.
What to watch next
- 5 November: Bank Negara's monetary policy meeting, where HSBC, Kenanga and DBS all expect rates to stay at 2.75%.
- 18 November: The final third-quarter GDP release, including the expenditure breakdown that will show whether consumption and investment carried growth as HSBC described.
- Early 2027: Whether Bank Negara signals a move towards normalisation, as HSBC and Kenanga expect, or holds for longer if inflation stays contained.
HSBC also expects growth to moderate to 5% in 2027 and 4.7% in 2028. Those later forecasts are further from the current data and should be read with more caution than the 2026 call, which is anchored in nine months of reported inflation and a third-quarter advance estimate.
Sources: New Straits Times, TradersUnion, reporting The Edge Malaysia and the HSBC Global Investment Research note, ASEAN Coverage, BusinessToday, reporting Kenanga Investment Bank Research, and FXStreet, reporting DBS Group Research. The HSBC research note itself was not directly linked in those reports.