By SHAUQI WAHAB
MALAYSIA’S economy expanded by 4.4% in the first quarter of 2025, supported by resilient household spending, sustained investment activity, and recovering tourism.
The growth was driven by strong private consumption, supported by favorable labor market conditions and government policy measures.
Investment activities continued to grow, while export performance was bolstered by strong electrical and electronics (E&E) shipments and recovering tourism, according to Bank Negara Malaysia (BNM) and Department of Statistics Malaysia’s (DOSM) on Friday (May 16).
The mining sector saw a contraction of 2.7% in 1Q25 compared to a contraction of 0.7% in 4Q24 due to lower crude oil and natural gas production, offsetting some of the gains in manufacturing and services.
As for the public consumption, the figure increased from 4% in 4Q24 to 4.3% in 1Q25.
BNM Governor Datuk Abdul Rasheed Ghaffour said the global environment has become ‘highly uncertain due to trade tensions and rapidly evolving policies’.
“Nevertheless, Malaysia is facing these challenges from a position of strength, with resilient domestic demand and diversified export markets helping to cushion external shocks,” he told a joint press conference with DOSM chief statistician Datuk Seri Mohd Uzir Mahidin.
He added that while growth in 2025 is expected to be slightly lower than the previously forecasted 4.5% to 5.5% range, Malaysia’s strong E&E exports and tourism recovery will continue to support economic activity.
On inflation and monetary policy, he said headline inflation remained moderate, averaging 1.5% to 1.9% in Q1 2025, with expectations that it will stay below 3% for the year.
BNM maintained the Overnight Policy Rate (OPR) at 3%, assessing that the current stance remains supportive of growth while keeping inflation in check.
However, he cautioned that risks remain tilted to the downside, particularly from weaker global demand and prolonged trade disruptions.
Uzir said that continued investment inflows and improving labor market conditions should sustain growth momentum.
Despite all that, Rasheed reaffirmed the resilience of Malaysia’s electrical and electronics (E&E) sector, noting that investment utilisation would continue despite global headwinds.
“Household spending remains a key driver of growth, and we expect the impact of external shocks to be contained,” he added during the Q&A session.
He also highlighted the government’s targeted policy measures to support domestic demand, noting that fiscal and monetary tools remain available to address emerging risks.
On potential delays in subsidy rationalisation, he underlined the importance of maintaining reform momentum.
“The government is committed to reforms, and the current stable growth and contained inflation provide a good opportunity to strengthen economic resilience,” he said.
In relation to Malaysia’s GDP figures, Uzir said some adjustments had been made to past data.
For 2022, the GDP growth was revised from 8.9% to 9.0%, while 2023 was adjusted from 3.6% to 3.5%.
For 2024, the overall GDP remains at 5.1%, though the services sector was revised slightly from 5.4% to 5.0%, he said.
Regarding front-loading activities in exports—where businesses accelerate shipments ahead of anticipated tariffs, Rasheed acknowledged some moderation but remained optimistic about sustained demand.
He added that front-loading except export demand, particularly for semiconductors and AI-related products, remains strong.
“While uncertainties persist, Malaysia’s diversified export markets will help mitigate risks,” he said.
On potential US tariffs on semiconductors, he said that while 30% of Malaysia’s semiconductor exports are currently exempt, further trade policy shifts could impact growth.
However, he is confident in Malaysia’s ability to adapt, given its strong position in global supply chains.
On monetary policy, he reiterated that the current 3% Overnight Policy Rate (OPR) aligns with inflation and growth projections.
He mentioned BNM’s data-dependent approach, stating that future decisions would hinge on evolving economic conditions.
“Our priority is sustainable growth with price stability. The OPR stance will be guided by incoming data, particularly on trade developments and domestic demand,” he said.
On liquidity measures, Rasheed clarified that the Statutory Reserve Requirement (SRR) adjustments were designed to enhance banking system liquidity, ensuring continued credit flow to support economic activity.
“The SRR is a pre-emptive tool to bolster liquidity, enabling banks to play an effective role in financing growth,” he said.
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