STANDARD Chartered Bank has lowered Malaysia’s 2025 GDP growth forecast to 4.2% from 5% previously on weaker-than-expected first quarter growth and tariff disruptions.
On that score, it said it continued to expect Bank Negara Malaysia (BNM) to cut the overnight policy rate (OPR) by 25 basis points (bps) in July.
In a joint announcement on Friday, BNM and Department of statistics Malaysia (DoSM) said the nation’s GDP increased 4.4% year-on-year (YOY) for the first quarter of 2025 (1Q25), easing from 4.9% in Q424.
“Growth in 2025 is expected to be slightly lower than the 4.5% to 5.5% range that we announced in March…we will announce a new forecast soon,” BNM governor Datuk Seri Abdul Rasheed Ghaffour told a media briefing.
In its note, Standard Chartered Bank estimated that a 24% and 10% reciprocal tariff rate will subtract about 0.7ppt and 0.4ppt, respectively, from GDP, assuming that about 30% of Malaysia’s exports are exempt from tariffs and a US import elasticity rate of 0.5x.
” The hit to GDP from a fall in demand of trading partners will also likely weigh on growth in 2025. Nevertheless, consumer spending and investment are likely to remain the key pillars of growth in 2025,” it said.
It has also lowered its 2025 Consumer Price Index (CPI) inflation forecast to 1.8% from 2.2% on lower-than-expected inflation to date and lower oil prices.
“GDP running below potential should also help dampen core inflation going forward. We continue to expect BNM to cut the OPR by 25bps in July, with the risk of more cuts (beyond 25bps) in 2025 if data deteriorates by more than expected,” it said.
It noted that the central bank has flagged in its Q1 GDP report that 2025 GDP growth may come in slightly below its 4.5-5.5 % growth target, with risks to the growth outlook tilted towards the downside. — TMR
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