Kuala Lumpur: OCBC Bank (Malaysia) Bhd has adjusted Malaysia’s gross domestic product (GDP) growth forecast for 2025, lowering it to 4.3 per cent from an earlier projection of 4.5 per cent, citing a weaker external demand outlook.
According to BERNAMA News Agency, Chief Economist and Head of Global Market Research and Strategy Selena Ling highlighted that the revision reflects mounting concerns over diminishing external demand and ongoing global economic challenges. The 4.3 per cent growth estimate takes into account the 24 per cent reciprocal tariff on Malaysian exports to the US, which was announced in early April.
Ling emphasized the significant downside risk for Malaysia, particularly given the country’s heavy reliance on semiconductors and electronics and electrical (EandE) exports, which account for nearly 80 per cent of its total exports to the US. She warned that if a semiconductor tariff is imposed, it could further strain growth, with the worst-case scenario potentially seeing GDP growth drop to around 3.5 per cent.
Exemptions on semiconductors and related products have provided some relief, as approximately 46 per cent of Malaysia’s exports to the US remain tariff-exempt under current regulations. These exemptions include EandE appliances such as electronic integrated circuits, photovoltaic cells, communication apparatus, and automatic data processing machines.
Ling also noted that the potential imposition of a semiconductor tariff by the US Trump administration could adversely affect the Malaysian economy. However, Malaysia’s 24 per cent reciprocal tariff rate remains lower than those of Vietnam, Cambodia, Thailand, and Laos, which helps maintain its competitive edge for US-bound exports.
Regarding monetary policy, Ling mentioned that Bank Negara Malaysia (BNM) might prioritize supporting economic growth if global and domestic conditions deteriorate, possibly shifting towards monetary easing if growth risks intensify. “We expect rate cuts to come in 2026 to the tune of 50 basis points, but could come earlier if growth risks become more evident sooner,” she said.
Despite short-term challenges, Ling stated that Malaysia’s medium-term outlook is bolstered by policy initiatives such as the New Industrial Master Plan 2030, National Energy Transition Roadmap, National Semiconductor Strategy, and the Johor-Singapore Special Economic Zone. “These initiatives are crucial in boosting potential growth, enhancing competitiveness, and building economic resilience,” Ling added.
She also addressed short-term pressures on the ringgit, noting that while these are expected to persist, Malaysia’s solid economic fundamentals and the prospect of a softer US dollar could offer medium-term support to the local currency.