Malaysia: Malaysia’s gross domestic product (GDP) growth forecast for 2025 has been revised to 3.9 percent, marking a 0.6 percentage-point reduction from the January 2025 projection, according to the World Bank’s Global Economic Prospects report.

According to BERNAMA News Agency, the downgrade was attributed to the unpredictable macroeconomic effects of higher trade barriers, which the World Bank noted could impede growth despite fiscal policy support, including social spending programs and public investment. The report also mentioned that modest fiscal consolidation is expected to persist in Malaysia.

The revision is not isolated to Malaysia. Other countries in the East Asia and Pacific (EAP) region also experienced significant downgrades. The Philippines and Vietnam both saw a 0.8 percentage-point reduction in their growth forecasts, bringing their projections to 5.3 percent and 5.8 percent, respectively. Thailand’s forecast was reduced by 1.1 percentage points to 1.8 percent, while Myanmar faced the most significant downgrade of 4.5 percentage points, resulting in a 2025 GDP forecast of -2.5 percent.

Global growth is expected to slow to 2.3 percent in 2025, with most economies experiencing a deceleration compared to the previous year. This growth rate will be the slowest since 2008, excluding periods of global recession, as per the report.

The report further states that Malaysia, with its large export-oriented manufacturing sector, is particularly vulnerable to renewed trade tensions, increased trade costs, and weaker growth in major economies. Indicators of manufacturing activity, such as headline manufacturing Purchasing Managers’ Indexes (PMIs) and goods trade indicators, have recently shown a decline.

Some trade-exposed emerging market and developing economies (EMDEs), including Malaysia, have witnessed a significant weakening in the new export orders component of the manufacturing PMI since November, amid rising global trade policy uncertainty, the report highlighted.