Since the announcement of Malaysia’s 2025 GDP growth forecast in Bank Negara Malaysia’s Economic Monetary Review in March 2025, the global economic landscape has changed considerably. The global growth outlook is affected by shifting trade policies and uncertainties surrounding tariff developments, as well as geopolitical tensions. As a small open economy, Malaysia‘s growth prospects will be shaped by these developments. It is to Malaysia’s advantage that our economy is facing these external headwinds from a position of strength. The latest indicators, including advanced estimates for the second quarter growth, continue to point towards sustained strength in economic activity. Domestic demand has been resilient and will continue to support growth going forward. Favourable labour market conditions, particularly in domestic-oriented sectors, and policy measures will continue to underpin private consumption. Meanwhile, expansion in investment activity will be sustained by progress in multi-year infrastructure projects, continued high realisation of approved investments and catalytic initiatives under the national development plans.

The Malaysian economy remains on a strong footing and is projected to expand between 4% and 4.8% in 2025. The updated growth projections account for various tariff scenarios, ranging from a continued elevation of tariffs to more favourable trade negotiation outcomes. This forecast remains subject to uncertainties surrounding the global economy, both on the downside and upside. Favourable trade negotiation outcomes, pro-growth policies in major economies, continued demand for electrical and electronic goods, and robust tourism activity could raise Malaysia’s export and growth prospects.

Bank Negara Malaysia Governor Dato’ Sri Abdul Rasheed Ghaffour said, ‘The Malaysian economy remains resilient despite global uncertainties. This is, in part, the outcome of structural reforms that we have undertaken over the years. The sustained strength in economic activity and moderate inflation provides a supportive environment to pursue structural reforms for a more resilient and competitive Malaysia in the future.’

Headline inflation is expected to average between 1.5% – 2.3% in 2025 amid moderate demand and cost conditions

Headline inflation is projected to remain moderate, averaging between 1.5% and 2.3% in 2025. The updated projection reflects the more moderate cost and demand outlook since March 2025. Inflationary pressure from global commodity prices is expected to remain limited, contributing to moderate domestic cost conditions. In this environment, the impact of domestic policy measures is expected to remain contained.