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Growth was driven by the services and manufacturing sectors, alongside a recovery in mining and quarrying and continued expansion in construction, according to DOSM's latest economic review.
Malaysia's economy gathered pace in the second quarter of 2026, expanding by 5.8% – up from 5.4% in the previous quarter.
According to the latest Malaysia Economic Statistics Review (MESR), Volume 7/2026 released by the Department of Statistics Malaysia (DOSM), overall,
the economy grew 5.6% in the first half of 2026, compared with 4.5% during the same period last year.
The stronger performance, DOSM said, was driven by the services and manufacturing sectors, alongside a recovery in the mining and quarrying sector and continued expansion in construction. In contrast, the agriculture sector contracted due to lower production of palm oil and fisheries.
The latest edition of the MESR provides an overview of Malaysia's recent economic developments based on key statistics released in May 2026, together with selected indicators for June 2026.
Global economy expected to remain resilient despite risks
Looking beyond Malaysia, the International Monetary Fund's (IMF) World Economic Outlook for July 2026 projects the global economy to grow 3.0% in 2026 before strengthening to 3.4% in 2027.
While global economic activity has remained resilient, the outlook continues to face downside risks from geopolitical tensions, trade fragmentation and elevated energy prices. At the same time, investments in artificial intelligence (AI) and digitalisation continue to support global economic activity and reshape economic growth.
Industrial production and manufacturing continued to expand
Malaysia's industrial activity remained resilient in May 2026 despite a more challenging external environment. The Industrial Production Index (IPI) increased 8.4% year-on-year, following 8.2% growth in April, driven by:
- Manufacturing, which grew 6.6%
- Mining, which recorded stronger growth of 19.8%
- Electricity, which increased 4.2%
On a month-on-month basis, the IPI rebounded 1.3%, reversing the 3.4% decline recorded in April.
Meanwhile, manufacturing sales rose 8.9% year-on-year to RM172.7bn in May, easing slightly from 9.1% growth recorded a month earlier.
The increase was led by the electrical and electronics products sub-sector, which surged 26.4%, followed by petroleum, chemical, rubber, and plastic products (4.9%), as well as non-metallic mineral products, basic metal & fabricated metal products (6.4%).
Compared with April, however, manufacturing sales declined 1.4%.
Wholesale and retail trade maintained growth
Supported by resilient domestic economic activity, Malaysia's wholesale and retail trade recorded total sales of RM171.3bn in May 2026, an increase of 11.0% year-on-year. The volume index also rose 3.1%.
Wholesale trade led the growth, expanding 18.4% to RM80.8bn, followed by retail trade, which increased 7.2% to RM71.9bn.
In contrast, the motor vehicles sub-sector declined 2.3% to RM18.6bn.
Exports continued to drive trade performance
Malaysia's trade performance remained strong in May 2026, with total trade rising 29.8% year-on-year to RM327.6bn.
The increase was driven by exports, which surged 45.3% to RM184.0bn, while imports rose 14.1% to RM143.6bn. This widened the country's trade surplus to RM40.4bn.
Compared with April, exports increased 0.4% while the trade surplus climbed 38.2%. Imports and total trade, however, declined 6.8% and 2.9%, respectively.
The positive momentum continued into June 2026, with exports and imports increasing 45.4% and 43.9%, respectively, year-on-year. Total trade reached RM340.9bn, representing an increase of RM105.3bn, or 44.7%, from a year earlier.
Inflation eased while producer prices rose
Malaysia's inflation increased 2.0% year-on-year in May 2026, with the Consumer Price Index (CPI) rising to 137.1 from 134.4 a year earlier.
Higher inflation was recorded across several categories, including information and communication (2.1%), food and beverages (1.4%), housing, water, electricity, gas & other fuels (1.2%), as well as recreation, sport & culture (1.1%).
On a month-on-month basis, headline inflation increased by 0.1%, slower than the 0.4% increase recorded in April. Inflation eased further in June, rising 1.9% year-on-year.
Meanwhile, Malaysia's Producer Price Index (PPI) rose 7.8% year-on-year in May, extending the 5.4% increase recorded in April.
All sectors posted gains, with mining once again recording the strongest increase at 52.6%, largely driven by a 74.5% rise in crude petroleum extraction prices.
On a month-on-month basis, producer prices increased 1.1%, while PPI growth strengthened further to 9.2% in June.
Labour market remained stable
Malaysia's labour market continued to show stability in May 2026.
The labour force increased 0.1% to 17.34mn people, while employment edged up to 16.82mn. On the whole, the labour force participation rate remained unchanged at 70.9%.
Although the number of unemployed people increased slightly to 513,400, compared with 511,800 in April, the unemployment rate held steady at 3.0%.
Outlook remains broadly steady
Looking ahead, DOSM expects Malaysia's economic outlook to remain broadly steady.
The country's Leading Index (LI) rose 0.8% year-on-year in May 2026 to 114.4 points, up from 113.5 points a year earlier.
On a month-on-month basis, however, the index declined 0.5%, mainly due to lower real imports of other basic precious and non-ferrous metals.
Despite the decline in its monthly reading and the smoothed long-term trend remaining below 100 points, DOSM said Malaysia's economy is expected to remain resilient, supported by stable domestic demand and the country's ability to adapt to global changes and technological advancements.
ALSO READ: 13,343 new health jobs approved in Malaysia as it expands clinics and hospitals across the country
Infographic / DOSM
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