SECTION 03 pg. 24 AL-SALĀM REIT OPERATING ENVIRONMENT Global growth is expected to be largely supported by emerging economies at an estimated 4.0% for 2026 and 2027, while growth in advanced economies is projected at 1.8% in 2026 and 1.7% in 2027. Nonetheless, the US economy is expected to expand by 2.4% in 2026, supported by lower policy rates, fiscal policies, and the continued momentum from a betterthan-expected second half of 2025. Subsequently, global headline inflation is projected to decline to 3.8% in 2026 and 3.4% in 2027 from 4.2% in 2025. On the domestic front, Malaysia recorded stronger-thanexpected Gross Domestic Product (“GDP”) growth of 4.9% in 2025, surpassing various official estimates of 4.0% - 4.8%, including those from Bank Negara Malaysia, the International Monetary Fund, the World Bank, and other sources. Key economic metrics showed positive signs according to the Malaysian Department of Statistics, including a drop in unemployment rate to an 11-year low of 2.9% in November 2025, steady headline inflation at 1.4% and the Ringgit emerging as the best-performing Southeast Asian currency with gains of ~ 9.0% versus the greenback as of December 2025. Continuing the positive momentum from 2025, growth in 2026 is expected to remain steady, with a slight moderation compared to 2025, primarily due to uncertainties arising from geopolitical tensions and tariff implementations. While these uncertainties pose downside risks to the economy, domestic growth is projected to remain resilient, with headline inflation expected to range between 1.3% and 2.0% in 2026, according to the Ministry of Finance’s Outlook 2026. Fiscal consolidation and structural reforms in policy also continue to drive investor sentiment and confidence, with Foreign Direct Investments (“FDI”) expected to remain strong, especially in data centres, tech, and Electrical and Electronics (“E&E”) related sectors. Export growth is expected to be supported by the resilience of the E&E sector and Malaysia’s role in the global E&E value chain. Throughout FY2025, Al-Salām REIT faced key macroeconomic and external factors that affected its operations. Global output was estimated at 3.3% in 2025, with activity picking up in the second half of the year, compared with a bleaker outlook at the start of 2025. Looking forward, the International Monetary Fund (“IMF”) projects global growth to remain steady at 3.3% in 2026 and moderate slightly to 3.2% in 2027. Trade tensions remain a risk and could weigh on global supply chain activities, potentially affecting the vibrancy of financial markets and global fiscal policies. REAL ESTATE OUTLOOK In view of the Malaysian government’s structural reforms, growth in the real estate sector is expected to be defined by adaptation to policy and infrastructure changes, including the promotion of industrial sectors and tourism, sustainabilityled policies, a proposed carbon tax, revisions to electricity tariffs, tax structures, and fiscal reforms. With a focus on key topics in affordable housing, urban regeneration, and green building practices, the real estate sector is well-positioned for strategic growth in support of national development. Broad sector demand is also supported by policy promotion, attracting FDIs in the industrial, logistics, and E&E sectors, with expected spillover to the commercial and office sectors, while transportation line expansions and infrastructure catalysts are expected to improve cargo and commuter connectivity and uplift land values along these routes, even extending to cross-border linkages with the soon-to-be completed RTS link in 2027. Promotion of Visit Malaysia Year 2026 is also expected to boost tourism and the hospitality and retail sectors. In terms of investments, real estate investors are increasingly cautious and are employing a disciplined approach to selecting assets for yield generation, aligning with structural reforms, long-term fundamentals for income resilience, and the flexibility of asset use.
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