KUALA LUMPUR, Oct. 10 (Xinhua) -- Malaysia's economy is projected to grow by 4 percent to 4.5 percent in 2026 amid U.S. tariff risks, according to the Ministry of Finance's (MOF) Economic Outlook 2026 report revealed on Friday.

MOF said in the report that the growth will mainly be underpinned by strong domestic demand, moderate inflation, favorable labor market and proactive policies undertaken by the government.

The performance will also be supported by Malaysia's ASEAN Chairmanship 2025 and Visit Malaysia 2026 (VM2026).

MOF, however, warned that the impact of U.S. tariff is anticipated to be greater in 2026 as it will reflect a full-year effect compared with the five-month (August-December) effect in 2025.

It noted that the electrical and electronics products remain Malaysia's export strength, contributing around 40 percent of total exports, and that any removal of this exemption could result in repercussions, reduce competitiveness, and strain sectors that are closely integrated with the U.S. supply chains.

Malaysia's economy grew by 4.4 percent in the first six months of the year, owing to lower export performance that was partly due to subdued global demand in response to the imposition of the U.S. tariffs. ■