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Malaysia’s economy expanded by 4.4% year-on-year in the first quarter of 2025, slightly below Reuters’ forecast of 4.5%, but in line with government expectations, official data showed Friday. On a quarter-on-quarter seasonally adjusted basis, GDP grew 0.7%, rebounding from a 0.2% contraction in Q4 2024, which was revised to 4.9% annual growth.
The central bank, Bank Negara Malaysia, attributed the Q1 growth to strong household spending supported by favorable labor market conditions and government policy measures. Investment activity also remained solid, while exports continued to expand. However, Governor Abdul Rasheed Ghaffour noted that growth was weighed down by lower oil and gas production, as well as a normalization in vehicle sales and manufacturing output.
Despite the modest growth, the central bank warned that the outlook is increasingly uncertain. Governor Abdul Rasheed indicated that full-year 2025 GDP growth is now expected to fall slightly below the previously projected range of 4.5% to 5.5%. A revised forecast will be released in the coming months. The downside risks include ongoing global trade tensions and a slowdown in external demand.
Adding to concerns, Malaysia is facing a looming 24% tariff on its exports to the United States starting in July unless a deal is reached to ease the levy. Prime Minister Anwar Ibrahim earlier stated that while the temporary suspension of tariffs has helped stabilize conditions, meeting this year’s growth target appears increasingly unlikely due to the external headwinds.
As global trade uncertainties persist, Malaysia’s economic momentum could face further pressure, prompting closer monitoring by policymakers and investors alike.
