Kuala lumpur: RHB Investment Bank Bhd (RHB IB) has maintained its forecast for Malaysia’s 2025 gross domestic product (GDP) growth at 4.2 percent, with an upside potential of up to 4.4 percent. Growth in the second half of 2025 is expected to moderate to 4.2 percent, compared to 4.4 percent in the first half, due to the dissipation of front-loading activities and the gradual impact of tariffs.

According to BERNAMA News Agency, several factors are expected to support the economic outlook, including clearer guidance on United States tariff rates, easing US-China trade tensions, domestic stimulus measures, and robust consumer and investment spending. A recent reduction in US reciprocal tariffs on Malaysia, from 25 percent to 19 percent, along with the extension of the US-China trade truce to November 10, is anticipated to provide short-term relief and boost manufacturing sentiment.

Domestically, the RM2.0 billion Merdeka cash handouts are expected to modestly increase consumption, potentially adding an estimated 0.2 percentage point to the GDP for 2025. This estimate is based on a 0.5 marginal propensity to consume and Sales and Service Tax rates of 5-10 percent. RHB IB’s forecast also considers downside risks, with the revised US tariff structure potentially reducing the GDP projection by up to 0.43 percentage point from an earlier estimate of 4.5 percent.

The investment bank remains vigilant about possible pressures on trade and manufacturing due to changes in US tariff policies and potential sector-specific measures, particularly concerning semiconductors. Despite these external challenges, Malaysia’s domestic economy displays resilience, bolstered by strong consumer spending and steady investment activity.

Strategic measures under the MADANI Economy framework, including the National Energy Transition Roadmap and the New Industrial Master Plan 2030, are expected to stimulate investment flows over the medium term. Domestically oriented industries such as retail, consumer goods, construction, healthcare, education, and utilities remain largely insulated from global uncertainties, driven by local demand.

For example, the retail sector is likely to benefit from a robust labor market and rising household incomes, while the construction sector is expected to gain momentum from ongoing activities in the non-residential, special trade, and residential segments. Earlier today, Bank Negara Malaysia governor Datuk Seri Abdul Rasheed Ghaffour stated that the central bank has maintained its 2025 GDP projection at between 4.0 percent and 4.8 percent, considering various possible outcomes from tariff negotiations.