MARC Ratings has revised Malaysia’s economic growth forecast for 2025 to 4.4 per cent, down from 5.1 per cent in 2024, citing global trade uncertainties and weaker export momentum as key drags on performance.
In a statement released on Friday, the Malaysian Rating Corporation Bhd said domestic demand continues to underpin growth, supported by a strengthening labour market, pro-growth policies and a rebound in tourism.
“The wholesale and retail trade index grew 4.8 per cent year-to-date (YTD) through April, up from 3.6 per cent in the same period last year,” it noted.
The construction sector expanded 14.2 per cent in the first quarter of 2025 (1Q2025), though this marked a moderation from 20.7 per cent in the final quarter of 2024. Meanwhile, agriculture reversed earlier losses to grow 0.6 per cent in 1Q2025, compared to a contraction of 0.7 per cent in the previous quarter.
“However, lingering external uncertainties prompted Bank Negara Malaysia (BNM) to cut the Overnight Policy Rate to 2.75 per cent in July from 3.0 per cent previously, and the central bank is expected to retain policy flexibility and respond accordingly to incoming data,” MARC Ratings added.
The agency warned that global growth may slow in the second half of 2025 due to heightened trade tensions and geopolitical instability, with recent US tariff hikes raising the spectre of renewed protectionism.
“The US imposed tariffs of 25 per cent, signalling the need for greater reciprocity in future negotiations,” the statement said. “Over time, US tariffs are anticipated to settle significantly higher than the long-term global average rate of 2.7 per cent, potentially in the high teens.”
Despite external pressures, Malaysian Government Securities (MGS) performed well in the first half of the year, buoyed by strong fundamentals and dovish signals from major central banks.
“Cumulative net foreign debt inflows reached RM26.9 billion between January and May, driving MGS yields 15 to 42 basis points lower. These factors contributed to a 5.3 per cent YTD appreciation of the ringgit as of mid-June,” MARC Ratings said.
The agency cautioned that these trends could moderate in the latter half of the year amid continued global volatility. Nonetheless, it expects domestic reforms, adjustments to the Sales and Service Tax (SST), and anticipated monetary easing by the US Federal Reserve to offer some downside protection.
Looking ahead, MARC Ratings projects the 10-year MGS yield to stabilise around 3.50 per cent and the ringgit to strengthen toward RM4.25 per US dollar by the end of 2025. - July 11, 2025
