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Malaysia's Economy Eases By 5.3% in Q1

-- Malaysia's economy slowed down in the first quarter as the impact of the Middle East war began to reverberate through the oil and energy industries.

The gross domestic product grew 5.3% during the January to March period, lower than the preceding quarter's growth of 6.3%, according to a Friday press release from the Department of Statistics.

The official GDP missed the 5.5% estimate from analysts surveyed by Bloomberg.

"Malaysia's first quarter of 2026 reflects an economy that remains fundamentally resilient, even with the rising global uncertainties, particularly elevated oil prices following the geopolitical tensions," The country's chief statistician, Dr. Mohd Uzir Mahidin, said.

Among sectors, the mining and quarrying sector contracted by 1.1% due to lower production within the crude oil and gas industries. The global oil supply has been affected, especially when Iran decided to close the Strait of Hormuz --- a critical global oil passageway --- amid the U.S.-Israel missile attacks on Tehran.

The government committed to raising its 10% biodiesel mandate, or B10, to a 15% biodiesel blend to bolster biodiesel use amid the fuel supply constraints brought by the conflict. Economy Minister Akmal Nasir made the statement on Tuesday, according to a report on The Business Times.

The other sectors moderately expanded. The services sector rose 5.4%, weaker than 6.3% in the fourth quarter of 2025. Manufacturing increased 5.8%, lower than the 6.1% rise in the previous quarter. Agriculture and construction grew 2.8% and 7.8%, respectively, slower than the previous quarter's 5.4% and 11%, the DOSM said.

ING's regional head of research for Asia-Pacific, Deepali Bhargava, said Malaysia is among developed Asian countries that are well-positioned to weather the conflict as domestic demand was held up, while being supported by tight labor markets.

The country's inflation in March rose 1.7% due to price hikes in the transportation sector.

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