MALAYSIA'S economy grew by 4.4% in the first quarter of 2025, a slight dip from the previous quarter's 4.9%.
Bank Negara Malaysia (BNM) in its Economic and Financial Developments in Malaysia in the First Quarter of 2025 release today said, the growth was driven by sustained domestic demand, with strong household spending supported by positive labour market conditions and income-enhancing measures such as the upward revision of the minimum wage and civil servant salaries. Investment activities also saw steady expansion, bolstered by both new and ongoing projects.
However, external sector performance was mixed. Export growth slowed, mainly due to a decline in mining exports, although electrical and electronics (E\&E) exports and tourism activity helped offset some of this weakness.
On the import side, growth remained positive, driven by strong demand for capital goods, reflecting continued investment and trade activities.
On the supply side, growth was primarily led by the services and manufacturing sectors, with government services supporting the services sector and E&E production underpinning manufacturing.
However, the growth of these sectors was tempered by a normalisation in motor vehicle sales and production following strong performances over the last few years, while the mining sector contracted due to lower oil and gas production.
Headline inflation moderated to 1.5% in the first quarter of 2025, down from 1.8% in the fourth quarter of 2024. This was largely attributed to lower utilities inflation, particularly in water tariffs and electricity charges. Core inflation, however, edged up to 1.9%, driven mainly by rental inflation. Despite seasonal price adjustments, inflation pervasiveness remained below the long-term average.
The ringgit remained broadly stable, appreciating slightly by 0.8% against the US dollar. The nominal effective exchange rate (NEER) against Malaysia's major trade partners increased marginally by 0.01%.
This stability was driven by the weakening US dollar amid growing uncertainties over US trade policy and expectations of slower US economic growth.
Credit growth continued to increase, with loans to the private non-financial sector rising by 5.5%. Business loans saw higher growth, particularly for working capital, while household loans grew by 6.0%.
Looking ahead, Malaysia’s economic growth in 2025 is expected to be slightly lower than the earlier forecast of 4.5% to 5.5%, due to escalating trade tensions and heightened policy uncertainties.
BNM governor Datuk Seri Abdul Rasheed Ghaffour noted that global trade developments, particularly trade tariffs, are expected to have both direct and indirect impacts on Malaysia's growth. Despite these external risks, domestic demand remains robust and is expected to continue driving growth, particularly in household spending and investment activities.
The inflation outlook for 2025 remains moderate, with headline inflation projected to stay within the range of 2.0% to 3.5%, driven by moderating global costs and the absence of excessive domestic demand. - May 16, 2025
