AFTER hitting a growth of 5.1%, Malaysia’s economic growth is projected to moderate to 4.7% in 2025, according to BIMB Securities Research.

In a note released today (Feb 17), it said the economy will be driven by a resilient labour market, sustained demand for electrical and electronics (E&E) exports, and the accelerated rollout of investment projects.

It said private consumption will remain a key pillar, supported by

higher government cash transfers, Phase 1 of the civil servant salary revision, and the new RM1,700 minimum wage.

It added that the services sector is expected to remain robust, benefiting from rising tourist arrivals and strong consumer demand.

However, it said downside risks persist, particularly from an uncertain global environment marked by deeper geo-economics fragmentation.

Domestically, the rationalisation of RON95 petrol subsidies and potential electricity tariff hikes could push up living costs, weighing on household spending.

“That said, a well-calibrated, gradual implementation of these subsidy reforms – complemented by targeted cash assistance, wage growth, and a resilient labour market – could help mitigate the impact and sustain consumer confidence,” it said.

External risks also warrant close attention, particularly the potential return of Trump’s trade and tariff policies, it added.

“While Malaysia previously benefited from trade diversions during his first term, a second term could introduce new challenges through multiple risk channels.

“These include direct tariffs on Malaysian exports – whether universal, reciprocal, or industry-

specific – spill over effects from tariffs imposed on key trade partners, and weaker global

trade amid an escalating trade war,” it said.

In the near term, it said the front-loading of exports and production ahead of potential new US tariffs may provide a temporary boost to manufacturing and related sectors.

“However, this momentum is likely to fade in the latter half of the year, leading to some payback. So far,

the impact of current US tariffs and China’s retaliatory measures on Malaysia’s growth appears limited, but escalating trade uncertainties pose a significant downside risk,” it said.

The economy grew by 5.1% in 2024, compared to 3.6% a year earlier, due to continued expansion in domestic demand and a rebound in exports.

For the fourth quarter of 2024, the economy was up 5%, driven mainly by domestic demand, according to a statement released by the Bank Negara Malaysia (BNM) on Feb 14. –TMR