Analysts foresee steady growth driven by household consumption and investment, tempered by external uncertainties that could curb export momentum.
PETALING JAYA: Malaysia’s economic prospects for 2025 hinge on robust domestic demand offsetting a turbulent global landscape, as reflected in Bank Negara’s recently released Economic and Monetary Review report.
Analysts foresee steady growth driven by household consumption and investment, tempered by external uncertainties that could curb export momentum. A cautiously optimistic tone prevails, with monetary policy expected to hold firm.
The labour market’s improvement, alongside rising incomes, is set to bolster private spending, while ongoing projects fuel investment activity.
CIMB Research projects a solid outlook, projecting gross domestic product (GDP) to grow 5% in 2025, driven by private consumption, which, in turn, will be driven by positive income prospects, improving labour market conditions and continued policy support, while the implementation of existing and new projects in the current investment upcycle lends support to robust investment activity.
However, the reseearch house flagged concerns.
“The projected moderation in export growth is a reflection of rising external headwinds,” it noted, citing geopolitical tensions and US tariff actions as key risks.
TA Research echoes this domestic strength.
“Our in-house forecast of key economic variables for 2025 remains within the official projection range, with continued employment and income growth will support household spending, while investment is expected to remain strong, underpinned by the continuation of multi-year projects.”
It added that the risks to Malaysia’s growth projection are generally balanced.
“However, we believe they are slightly tilted to the downside, largely driven by external factors,” it cautioned, pointing to global trade disruptions and domestic commodity challenges.
On inflation, TA Research noted that it is revising its 2025 forecast to a narrower range of 2% to 3%, expecting manageable effects from fuel price adjustments.
Hong Leong Investment Bank (HLIB) Research sees GDP growth at 4.9% this year, underpinned by domestic demand.
“Continued employment, wage growth and income-related government measures are expected to prop up private consumption, while investment activity is expected to see continued expansion driven by the implementation of new and existing multi-year projects,” HLIB Research highlighted.
Exports, however, face headwinds, it stated, with exports activity expected to moderate amid global policy uncertainties, though diversified markets offer some relief.
Inflation forecast for 2025 is pegged at 2.7%, driven by changes to domestic policy measures such as the targeted RON95 petrol subsidy reform, sales and service tax expansion and wage upgrades, while easing global costs provide relief.
Monetary policy stability is a common thread.
CIMB Research said: “We reiterate our view of an extended overnight policy rate (OPR) pause at 3% throughout 2025.”
TA Research concurred, stating: “We assess that Bank Negara’s monetary policy language has remained neutral, reinforcing our expectation of an extended OPR pause throughout 2025,” despite a revised ringgit forecast of RM4.20 against the US dollar.
Similarly, HLIB Research said: “With Bank Negara projecting steady growth and manageable inflation, we continue to expect the monetary policy committee to remain patient and keep the OPR at 3% in 2025.”
In its Economic and Monetary Review report, Bank Negara’s 2025 GDP growth forecast stood at 4.5% to 5.5%, with headline inflation at 2% to 3.5% for the year. In 2024, Malaysia achieved a GDP growth of 5.1%, with headline inflation at 1.8%.
