Posted 3 weeks ago by Admin in Corporate
PETALING JAYA: Economic growth is expected to moderate in 2025, weighed down by escalating global trade tensions and policy uncertainty from major trading partners, even as domestic demand provides some support.
Following the release of the country’s first-quarter (1Q25) gross domestic product (GDP) advance estimate – which came in at a one-year low of 4.4% – economists are growing more cautious on the outlook for the economy.
Maybank Investment Bank Research (Maybank IB) has flagged the risks stemming from evolving US trade policy under the Trump 2.0 administration.
“Currently, our full-year real GDP forecast is a slower growth of 4.3% in 2025 (2024: 5.1%), followed by further moderation to 4% in 2026.
“However, this outlook is highly vulnerable to the downside risk from ‘trade shocks’ following the evolving Trump 2.0’s trade policy amid the twists and turns in US tariffs announced so far,” it said, highlighting semiconductors as a key area of concern.
Other brokerages have echoed similar caution. TA Research is maintaining its 2025 GDP growth range of 4.8% to 5.3% for now, but noted “a growing risk that the economy may underperform, particularly considering the escalating trade tensions”.
In a sign of the government’s heightened focus on trade relations, Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Aziz is set to meet with US officials on April 24 to address reciprocal tariffs affecting Malaysian exports, it noted.
Kenanga Research, while maintaining its 4.8% GDP growth forecast for now, acknowledged risks to the outlook, saying, “If trade tensions prolonged and escalate further, we project overall growth could be cut by 0.3 to 0.5 percentage points.”
Still, it expects strong domestic demand, backed by robust private and public spending, bolstered by investment upcycle and rising household income, to help anchor the economy.
Hong Leong Investment Bank (HLIB) Research is less optimistic, projecting growth of just 4% in 2025 – below Bank Negara’s official range of 4.5% to 5.5% – due to softer external demand amid heightened global trade uncertainty.
It added that while domestic support is expected from cash transfers, wage hikes and tourism, downside risks persist.
BIMB Research has revised its 2025 forecast down from 4.7% to 4.4%, citing the impact of US tariff policies.
“Even with the 90-day tariff pause and some key products on the exclusion list, Malaysia’s growth is subjected to direct and indirect effects of the heightening global trade war,” it noted, with manufacturing and investment activity both expected to see slower momentum.
The downbeat GDP forecasts follow Malaysia’s advance estimate for 1Q25 GDP, which registered 4.4% year-on-year (y-o-y) – the slowest pace since 1Q24.
While March trade figures showed some strength – with exports rising 6.8% y-o-y and the trade surplus widening to RM24.7bil – the trend is unlikely to hold.
Maybank IB cautioned, “Expect volatile external trade figures ahead as export front-loading effect runs its course and followed by cloudy outlook depending on the outcome of Malaysia’s trade and tariff negotiation with the United States.”
It forecast 2025 export and import growth at 4.3% and 5.8%, respectively, with a trade surplus of RM120bil.
Kenanga Research also expects frontloading to boost short-term exports: “We expect a surge in 2Q25 exports as businesses accelerate shipments to avoid potential tariffs.” However, it acknowledged this momentum may fade in the second half.
TA Research, maintaining its export growth forecast of 3.9% for 2025, flagged several downside risks that could weigh on this outlook. These include escalating geopolitical tensions, weakening demand from key trading partners, and a prolonged slowdown in global production activity.
BIMB Research downgraded its 2025 export growth forecast to 3.7% and warned of persistent uncertainty. “Market uncertainties over the American trade policy will lead exporters globally to take a ‘wait-and-see’ approach and indirectly impede trade growth potentials,” it said.
Meanwhile, HLIB Research sees Malaysian exports to the United States facing an effective tariff increase of 5.5% despite exemptions. Still, there is some hope for structural benefits from the current turbulence.
Maybank IB noted the US tariff and trade policy headwinds may accelerate Malaysia’s export market diversification and push up the value chain, transforming today’s challenge into a competitive advantage.
