Economists Remain Divided Over Malaysia's 2025 Growth Trajectory
(MENAFN) Economists remain divided over Malaysia’s economic trajectory following a subdued second-quarter performance that has cast doubt on full-year growth prospects.
Despite domestic demand showing strength, persistent risks tied to global tariffs, geopolitical instability, and fiscal reforms continue to cloud the outlook for the second half of 2025 and beyond, according to UOB Global Economics and Markets Research.
"We project Malaysia's gross domestic product (GDP) growth to moderate to 3.6 percent in the second half, bringing full-year growth to 4 percent in 2025," the firm stated in a recent report.
Looking ahead, UOB anticipates a modest rebound in 2026, forecasting GDP growth at 4.5 percent. This outlook factors in expected economic catalysts, including a 25 basis point cut in the overnight policy rate—down to 2.5 percent by the end of Q4 2025—to help bolster momentum into the following year.
Meanwhile, ANZ Research has held firm on its GDP growth estimate for 2025, maintaining a forecast of 4.1 percent. Despite strong investment and consumption metrics, the group flagged deteriorating trade performance as a key drag.
"The country's external demand is expected to weaken further, but overall growth should remain supported by resilience in domestic demand, particularly sustained momentum in investment," it noted.
In contrast, MBSB Research has revised its forecast upward, raising its 2025 GDP estimate to 4.3 percent from an earlier 4 percent, citing unexpectedly solid growth in the first half.
"Although the second quarter GDP is slightly lower than the advance estimate, the first half growth is still better than our earlier estimate," the firm said in a note issued last Friday.
While Malaysia’s commodity exports continued to decline, MBSB pointed to stronger-than-expected external trade performance—buoyed by front-loading activities and a rebound in re-exports.
The Malaysian economy expanded by 4.4 percent in Q2 2025, with domestic demand remaining the primary growth engine.
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