Malaysia strengthens economic reforms as third-quarter GDP growth is estimated at 5.3%

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Malaysia’s economy is estimated to have grown 5.3% in the third quarter of 2026 after recording 6.0% growth in the previous quarter, according to the Department of Statistics Malaysia.
The surge in global crude oil prices to U.S.$110–U.S.$120 per barrel, compared with the assumption of U.S.$70 per barrel, has intensified cost-of-living pressures and challenged the government’s fiscal projections.
The government is committed to rationalising subsidies and strengthening governance through the Fiscal Responsibility Act and the Parliamentary Services Act to maintain a low fiscal deficit and protect the economy.

This article was translated from the original. Read the original version by our correspondent here.

Fiscal reforms and growth projections

As reported by The Edge Malaysia, citing the Department of Statistics Malaysia, Malaysia’s economy is estimated to have grown 5.3% in the third quarter of 2026 after recording 6.0% growth in the previous quarter.

In his address at the Ministry of Finance staff assembly in Putrajaya on Monday, Anwar said the reform measures include strengthening fiscal management, rationalising subsidies through targeted assistance and improving government governance. According to him, these measures have enabled the country to continue recording positive progress despite global economic uncertainty.

He said the country’s economic performance can be seen in gross domestic product growth, unemployment and inflation rates, as well as the reduction in the hardcore poverty rate to 0.09%. Anwar also said the government remains able to reduce the fiscal deficit while continuing to support the economy and assist the people through prudent economic management.

In its advance estimate for third-quarter 2026 GDP, DOSM said growth was supported by positive performance across all economic sectors except mining and quarrying, which recorded a contraction. Cumulatively, for the first three quarters of 2026, Malaysia’s economy grew 5.5%, higher than the 4.8% recorded during the same period in 2025.

Cost-of-living pressures and the governance agenda

Anwar said the achievement must be viewed in the context of current economic challenges, including the sharp rise in global crude oil prices, which far exceeded the government’s assumptions when preparing last year’s economic projections. He said the projections at the time were based on oil prices of around U.S.$70 per barrel, but prices have since risen to between U.S.$110 and U.S.$120 per barrel.

According to him, higher oil prices can put pressure on goods prices and the cost of living, making it more difficult for the government to meet the people’s basic needs. He also stressed the importance of responsible management of national debt, so that borrowing is undertaken only when necessary and does not burden future generations.

Anwar said economic reforms must also be supported by institutional reforms to strengthen governance, including through the implementation of the Fiscal Responsibility Act and the Parliamentary Services Act. He added that efforts to strengthen the economy must go hand in hand with resolving issues that directly affect people’s daily lives, including workers’ incomes, rental rates, prices of essential goods and the development of basic infrastructure in less developed states.

He said the Madani Economy framework must maintain a balance between driving growth, attracting investment and expanding the use of technology, while ensuring that the benefits of development are shared by all Malaysians. According to him, the success of the reform agenda depends on the commitment of all parties to implement policies with integrity, prevent leakages and combat corruption.

In our previous report on Malaysia’s target to reduce the fiscal deficit to below 3% of GDP, we outlined the fiscal consolidation plan supported by targeted subsidy reforms and digitalisation to improve public spending efficiency. We also highlighted that the deficit reduction trajectory depends on economic fundamentals, investor confidence, revenue collection and consistent policy implementation, in addition to external factors such as oil price movements that may affect the government’s debt position.

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