MALAYSIA'S GDP FORECAST TO GROW BY 4.9 PCT IN 2025-- RESEARCH HOUSES

KUALA LUMPUR, Dec 17 (Bernama) -- Malaysia’s gross domestic product (GDP) is projected to expand by 4.9 per cent in 2025, driven by domestic tailwinds and tempered by global economic uncertainties, according to research houses.

Maybank Investment Bank (Maybank IB) noted that the forecast marks a moderation from the 5.2 per cent expansion recorded in the first nine months of 2024, attributed to the interplay of strong domestic factors and external challenges tied to global developments, including potential trade policy changes under a second Trump presidency.

“Two key domestic factors are driving Malaysia's economy. First, the country's investment upcycle remains strong, reflected in the consistent gross fixed capital formation growth. The sustained momentum in approved investments since 2021 is now translating into increased actual and realised investments.

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“This aligns with the uptrends in the implementation rate of approved manufacturing investment, rising imports of capital goods, higher banking system loans for industrial buildings and corporate earnings,” it said in a note today.

Secondly, Maybank IB anticipates that income-boosting measures in Budget 2025 will drive consumer spending, such as civil service salary and pension reviews involving an additional MYR12.3 billion allocation for emolument and retirement charges in the Federal Government’s operating expenditure.

There are also higher cash handouts to lower-income groups, increases, extensions, and enhancements in personal income tax reliefs, and a monthly minimum wage hike to RM1,700 from RM1,500.

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In a separate note, Hong Leong Investment Bank Bhd (HLIB) said the forecast, a tad softer than 2024’s 5.0 per cent is amid a challenging global environment but still within the government’s target range of 4.5 per cent to 5.5 per cent.

“This growth will be underpinned by steady improvement in the labour market, income-boosting measures, continued tourism recovery, and execution of approved investments,” it said.

HLIB said inflation is expected to rise to 2.7 per cent year-on-year in 2025 from an estimated 1.9 per cent in 2024, with potential upward pressure hinging on the timing of RON95 subsidy reforms, likely to be introduced in the second half of 2025.

“As the inflation pressure is supply-driven, alongside rising external risks from Trump’s tariff plans, we expect Bank Negara Malaysia will maintain the overnight policy rate at three per cent for 2025,” it said.

Global headwinds, including uncertainties surrounding United States (US) trade policies under Trump’s potential return, pose risks to Malaysia’s economy, however, HLIB expects a more targeted approach to tariffs compared to previous blanket measures.

On the monetary front, the US Federal Reserve is projected to continue its rate-cutting cycle in 2025, albeit at a softer pace of 50 basis points compared to the previously anticipated 100 basis points.

“Despite external headwinds,  Malaysia is on a sturdier footing with steady growth, ongoing subsidy reforms, a robust investment pipeline, and a more stable political climate,” it added.

-- BERNAMA