Malaysia’s 2025 Growth Forecast Softer!

Malaysia’s economy will likely grow at its slowest pace in a year. In the first quarter, household consumption weakened, and exports showed a tepid outcome. Key sectors, including services and manufacturing, expanded slower than in the previous quarter as consumers tightened spending and export momentum faded.

The economy expanded 4.5 per cent in the first three months of 2025 compared to the prior-year period. This is according to the 8–13 May poll of 21 economists by Reuters. The economy grew 5 per cent in the fourth quarter.

In April, economists lowered Malaysia’s 2025 consensus growth forecast to 4.3 per cent from 4.7 per cent earlier in the year, citing trade tensions and weaker domestic consumption, while the International Monetary Fund (IMF) cut its forecast to 4.1 per cent. Malaysia faces a duty of 24 per cent on exports to the United States starting in July unless a bilateral deal is reached.

The US and China – Malaysia’s two major trading partners – agreed to a temporary 90-day truce on tariffs recently, but risks to economic growth remain. In response to a weaker outlook, Bank Negara Malaysia (BNM) has announced a reduction to the statutory reserve requirement (SRR) ratio of 100 basis points to 1.00 per cent, effective 16 May, which will inject roughly RM19 billion into the banking system.

Economists have also adjusted their outlook on interest rates, now forecasting one rate cut in 2025 in a Reuters poll, from an earlier projection that rates would remain flat at 3 per cent this year.

While 2025 is expected to see lower growth as international trade relationships are reforged, the IMF has also revised 2026 projections downward: Global real GDP growth is now projected at 3% next year, down from 3.3% in January. This is 0.7 percentage points lower than the pre-pandemic (2000–2019) average global growth rate of 3.7%.

The U.S. economy is expected to grow just 1.7% in 2026, with the impact of tariffs and trade wars continuously affecting growth over the next year.

We need to prepare for the worst while hoping and praying for the best!

 

References:

Economists dial back Malaysia’s 2025 growth forecast amid softer household demand,

Malay Mail, 14 May 2025

 

Charted: Falling GDP Growth Forecasts for 2025, Niccolo Conte, Visual Capitalist, 2 May 2025