Malaysia’s 1Q25 GDP growth may ease to 4%-4.5%

by HIDAYATH HISHAM

MALAYSIA’S GDP for the first quarter of 2025 (1Q25) is expected to come in between 4% and 4.5%.

Universiti Kebangsaan Malaysia (UKM) Faculty of Economics and Management Prof Dr Mohd Rizal Palil said the adjustment reflects global economic uncertainties that are also being felt by other countries.

“In addition, the India-Pakistan conflict has contributed to the downward revision, while domestic economic support remains moderate.

“I also believe the leadership of US President Donald Trump — who may announce new tariff changes — could affect 2Q GDP projections,” he said.

Meanwhile, Maybank Investment Bank Bhd said its forecast is based on slightly stronger growth in the services sector at 5.3% year-on-year (YoY), compared to 5.2% previously, as well as growth in the agriculture sector at 0.8%.

“A smaller contraction is expected in the mining sector at -3.2%, alongside slower growth in the construction (13.9%) and manufacturing (4.2%) sectors,” it said.

Hong Leong Investment Bank Bhd (HLIB Research) also revised its GDP growth forecast to 4.5% YoY, exceeding the Department of Statistics Malaysia’s earlier estimate of 4.4%.

This, it said, is supported by continued — albeit moderating — growth in the services, manufacturing and construction sectors.

“Although the US has halted further tariff hikes against its trade partners, including Malaysia and China, the higher tariff rates compared to last year and uncertainty in trade policy could prompt businesses to take a more cautious approach to investment and hiring plans,” it said.

However, economist Prof Emer Dr Barjoyai Bardai said GDP growth is likely to taper off from 2Q through to the end of the year due to both external and domestic factors.

“Analysts are targeting economic growth of between 4.5% and 5.5% for 2025, but there is a possibility of further moderation. For instance, the International Monetary Fund (IMF) has revised Malaysia’s growth forecast from 4.7% to 4.1%.

“One major concern is the weakening ringgit, which is projected to hit RM4.90 against the US dollar by year-end, placing pressure on the national economy.

“If this trend continues, full-year GDP growth could settle around 4% or slightly below,” he said.

He added that Malaysia’s economy remains heavily reliant on private consumption, which accounts for more than half of the GDP composition.

“Therefore, market sentiment and consumer confidence are key to determining growth momentum.

“Even if the tariff crisis is resolved in principle, the medium- and long-term impact remains significant. It will have implications on global trade and investment decisions,” he said.