Post by : Badri Ariffin

Malaysia’s consumer spending is expected to remain strong in 2026, supported by stable economic growth and a positive employment outlook, according to BMI, a Fitch Solutions company.

BMI forecasts that household spending will increase by 4.2% year-on-year (y-o-y) in real terms, reaching RM1.10 trillion at 2010 prices. This is significantly higher than the pre-COVID-19 level of RM779.7 billion recorded in 2019.

The company also expects consumer spending to continue growing in 2027. Household expenditure is projected to rise by 4.1% y-o-y, reaching RM1.14 trillion in real terms.

Strong Labour Market to Support Consumer Demand

BMI said Malaysia’s strong labour market is expected to play a key role in supporting consumer spending throughout 2026.

The report forecasts that real wage growth will remain comfortably above inflation, helping to strengthen purchasing power and support household consumption during the year.

High Debt to Limit Spending Growth

Despite the positive outlook, BMI noted that high household debt and the cost of servicing that debt will continue to limit consumer spending.

The company expects Bank Negara Malaysia to keep the Overnight Policy Rate (OPR) unchanged at 2.75% throughout 2026, meaning there is likely to be little additional relief for borrowers.

Malaysia’s Economy Expected to Remain Stable

BMI projects Malaysia’s economy to grow by an average of 4.3% y-o-y in 2026. Economic growth is expected to remain broadly steady, with real gross domestic product (GDP) growth of 4.0% y-o-y in 2027.

According to the report, Malaysia’s position as a net energy exporter gives it an advantage over many regional economies by supporting export earnings.

BMI also said stronger petroleum-related revenue and higher dividends from Petroliam Nasional Bhd (Petronas) are expected to help offset rising subsidy costs and support the government's fiscal consolidation efforts.

However, it added that fiscal policy is expected to remain contractionary, which could reduce household disposable income.

Employment Outlook Remains Positive

BMI expects Malaysia’s unemployment rate to average 3.1% of the labour force in both 2026 and 2027.

The forecast is supported by continued foreign investment, improving tourism performance, and increased activity in key industries such as agribusiness, electronics, and manufacturing.

Risks Remain if Global Growth Weakens

BMI also highlighted potential risks to the outlook. It said that if economic conditions weaken, particularly if mainland China's economic growth slows more than currently expected, unemployment could rise and weaken consumer spending.

The company said such a scenario would quickly affect the overall consumer outlook in Malaysia.

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