Malaysia businesses remain positive despite dip in confidence in Q1 2026

The latest Business Tendency Statistics show that overall optimism remains intact in the first quarter of 2026, even as confidence moderates from the previous quarter. All sectors expect positive conditions, with mixed signals across states.

Businesses in Malaysia are entering the first quarter of 2026 with cautious confidence.

According to the latest Business Tendency Statistics released on 27 February 2026 by the Department of Statistics Malaysia, overall business sentiment remains positive. The confidence indicator (CI) stands at +4.0%, easing from +6.2% in the fourth quarter of 2025.

The quarterly publication, based on the Business Tendency Survey, provides insights into expectations for business performance over the next three and six months.

Dato’ Sri Dr Mohd Uzir Mahidin, Chief Statistician Malaysia said businesses foresee a favourable business environment in the first quarter of 2026, supported by the +4.0% confidence indicator as compared to +6.2 in the previous quarter.

All sectors remain in positive territory

Across the board, all major sectors expect positive business conditions in Q1 2026, with varying degrees of optimism.

The services sector continues to lead, recording a confidence indicator of +6.6%, although this is lower than the +10.0% posted in the previous quarter.

The industry sector also remains optimistic at +3.3%, easing from +5.8% in Q4 2025.

Encouragingly, the construction sector has returned to positive ground, posting +1.4%, compared to -1.2% previously.

Meanwhile, the wholesale & retail trade sector maintains a positive reading of +2.5%, slightly down from +3.5% in the last quarter.

Mixed business confidence across states

At the state level, the business confidence indicator presents a mixed picture.

Several states recorded positive readings in Q1 2026, including Johor (+3.0%), Negeri Sembilan (+8.0%), Pulau Pinang (+4.5%), Perlis (+3.7%), Selangor (+13.1%), Terengganu (+10.2%), Sabah (+2.4%), W.P. Kuala Lumpur (+2.0%), Labuan (+2.0%) and Putrajaya (+3.4%).

However, other states reported negative readings, signalling ongoing pressures. These include Kedah (-0.9%), Kelantan (-5.3%), Melaka (-1.9%), Pahang (-9.8%), Perak (-7.5%) and Sarawak (-0.7%).

The divergence highlights that while national sentiment remains positive overall, business conditions are not uniform across the country. Local economic drivers and sectoral concentration continue to shape confidence levels at the state level.

Outlook for the first half of 2026

Looking ahead to the first half of 2026, businesses remain upbeat, although at a slightly lower net balance of +10.8%, compared to +12.0% recorded previously.

All sectors expect favourable conditions over the next six months.

In particular, the services sector anticipates stronger momentum, with a net balance of +20.6%, improving from +16.5% recorded for the period of October 2025 to March 2026.

The construction sector also foresees positive conditions at +12.0%, slightly higher than the +11.3% recorded earlier.

At the same time, sentiment in the wholesale & retail trade sector remains optimistic at +6.9%, although this is lower than the previous +10.3%.

Similarly, the industry sector expects a better business situation with a net balance of +6.2%, compared to +10.0% previously.

Overall, the data suggests that while optimism is still present, businesses are navigating 2026 with both confidence and care.

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