Kuala Lumpur: Malaysia’s economy is anticipated to expand between 4.5% and 5.5% in 2025, driven largely by robust domestic demand and a strong investment landscape, according to Bank Negara Malaysia (BNM). However, exports are expected to moderate amid heightened external uncertainties, as outlined in BNM’s Economic and Monetary Review 2024.
According to BERNAMA News Agency, the domestic growth outlook faces several downside risks, primarily due to significant uncertainties from external factors. The report highlights that higher household spending, supported by employment and faster income growth, along with policy support, will be key contributors to this growth.
In 2025, improvements in labor market conditions and income-related government policies are expected to bolster household spending. Private consumption is projected to grow by 5.6%, driven by enhanced labor market conditions and higher income growth, with employment expected to increase by 2.1% to reach 17 million persons.
The central bank forecasts strong private investment growth at 10.1%, underpinned by the global technology upcycle and sustained external and domestic demand conditions. Income growth is anticipated to improve, supported by higher labor utilization and government policy measures, including the implementation of a higher minimum wage.
Gross fixed capital formation (GFCF) is expected to grow by 9.3%, driven by robust investments in structures and machinery and equipment. Meanwhile, headline and core inflation are projected to average between 2% and 3.5%, and 1.5% and 2.5% respectively, with temporary and contained inflationary impacts from domestic policy measures and tax adjustments.
Most economic sectors are projected to grow in 2025, with services and manufacturing sectors as key growth drivers due to improved domestic and external conditions. The services sector is expected to register a growth of 5.7%, supported by expansion across all subsectors, particularly transport, storage, finance, and real estate.
For the manufacturing sector, growth is predicted to moderate slightly to 3.9% in 2025, with the electrical and electronics (E and E) and consumer-related industries continuing to expand, although offset by slower growth in primary and construction-related industries.
BNM anticipates a continued investment upcycle into 2025, with strong private investment growth and public investment driven by new and existing projects. Malaysia’s conducive investment ecosystem is expected to attract new investors and support investment retention, aided by national master plans and catalytic initiatives.
Following a strong trade recovery in 2024, exports and imports are expected to grow at a more moderate pace in 2025 amid global policy uncertainties. Gross exports are projected to rise by 5.2%, driven by manufactured exports, particularly E and E, while gross imports are expected to moderate to 7.4% growth.
Lastly, BNM notes that the ringgit’s performance will be influenced by fluctuations in capital flows, with foreign inflows and Malaysia’s favorable economic prospects providing longer-term support.