Malaysia Remains Well-positioned To Navigate Challenges This Year -- MIDF

KUALA LUMPUR, March 26 (Bernama) -- Malaysia remains well-positioned to navigate challenges, backed by strong economic fundamentals, robust domestic demand, resilient household spending and increased investments.

MIDF Amanah Investment Bank Bhd said domestic growth fundamentals remain robust, driven by increasing spending from both consumers and businesses which will continue to support economic expansion this year.

Besides, beyond increased government expenditure, investment activities will be fuelled by the initiation and progress of various infrastructure projects.

“However, we remain cautious of Malaysia’s trade outlook amid the heightened uncertainties surrounding global trade.

“Malaysia’s trade environment could be more challenging in the coming months, especially if the US imposes higher tariffs on semiconductors and other manufactured goods,” it said.

Hence, MIDF Amanah expects Malaysia's gross domestic product (GDP) to grow at a more stable rate of 4.6 per cent in 2025, easing from a surge and strong growth of 5.1 per cent last year.

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Domestic Spending

MIDF Amanah anticipates continued growth in domestic spending, driven by a robust labour market, manageable inflation, accommodative monetary policy, and recovery in tourism activities.

It said government support measures, including cash assistance will further stimulate spending.

Additionally, having access to flexible retirement fund accounts, higher civil servant salaries, and an increased minimum wage also reinforce consumption growth this year.

“The upcoming Hari Raya Aidilfitri festivities are expected to further boost retail activity in the coming quarter,” it said.

Broad-based sectoral growth expected

Major economic sectors are poised for continued expansion this year with the services sector driven by rising household spending as well as increased tourist arrivals and spending.

“Despite policy adjustments like higher diesel prices and increased utility tariffs, overall price pressures remain manageable, minimising the impact on consumer purchasing power.

“The delayed RON95 fuel subsidy rationalisation until mid-2025 continues to support growing household expenditures,” it said.

MIDF Amanah said the construction sector is set to continue its robust growth benefiting from ongoing infrastructure projects, including the Pan Borneo Highway, East Coast Rail Link (ECRL), Miri airport expansion, and Penang Light Rail Transit (LRT).

It also remains optimistic about data centre expansion which has supported capital goods imports and is also generating demand for the construction and utility sectors.

Downside risks to growth outlook

It said rising external uncertainties could challenge Malaysia’s trade and export driven sectors.

“Stricter US trade policies, including reciprocal tariffs and semiconductor duties, may dampen demand, particularly as electric and electronic (E&E) products accounted for 60.3 per cent of Malaysia’s exports to the US in 2024.

Retaliatory measures by other countries have also escalated geopolitical and trade tensions, reshaping global trade alliances and contributing to a more fragmented trade environment, which may weaken global trade activity.

“While the cooler inflation reading in Feb-25 raises hopes for the US Federal Reserve to cut rates by mid-year, the relief may be short-lived.

“The full impact of US President Donald Trump’s tariff hikes, along with broader policies such as tax cuts, deregulation, and stricter immigration rules, could further fuel inflation, eroding consumer sentiment and purchasing power,” it added.

-- BERNAMA