Economists Warn Middle East Tensions Slow Malaysia’s Economic Growth

2026-04-02 05:11:38

(MENAFN) Economists warned on Thursday that rising costs linked to ongoing Middle East tensions could dampen Malaysia’s economic momentum, even as the manufacturing sector showed signs of recovery in March, with the Purchasing Managers’ Index (PMI) reaching its highest level in nearly four years, according to reports.

The rebound in March indicates that February’s slowdown was mostly seasonal. Activity has stabilized and is expected to continue into April, analysts said.

However, the research noted that demand remains uneven amid increasing logistics, energy, and raw material costs driven by tensions in the Middle East, which could act as a significant headwind and limit the pace of recovery.

"Overall, manufacturing performance will hinge on whether demand can outpace rising costs," it said.

While keeping Malaysia’s 2026 GDP forecast at 4.5 percent, analysts highlighted that risks are skewed to the downside due to potential disruptions in global energy and transportation costs.

"Still, domestic demand and continued support from the electrical and electronics products (E&E) sector should underpin growth," they added.

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