- Strong underlying fundametals cement position of strength in the face of rising external uncertainties.
- Diversified export structure to help weather trade protectionism
- We are positive of 2025 growth prospects and expect 4.7% GDP growth
Sustained growth in domestic economy
Malaysia's economy remains firmly on a healthy growth trajectory as domestic demand is likely to strengthen further with sustained consumer spending and stronger investment activities. Its strong fundamentals and diversified economic structure, coupled with government's concerted effort to spur higher economic growth will help ensure Malaysia's uptrend stays intact. Despite concerns of slower growth, Jan 2025 credit demand has demonstrated healthy y-o-y growth as loans for households and businesses grew by 6.0% and 5.1%, respectively. Steady overall banking system loans growth of 5.7% in Jan 2025 (vs 5.5% in Dec 2024, 5.7% in Jan 2024) signifies the positive growth trajectory of Malaysia's economic outlook in 2025. Tourism activities in 2025 will likely provide a strong fillip with Malaysia's air passenger traffic for Jan 2025 exceeding the pre-pandemic volume for the first time.
Robust employment market underpins strong consumption
The upward revision of the minimum wage and civil servant salaries as well as higher financial assistance for the low-income group will ensure 2025 domestic expenditure remains intact. Meanwhile, private investment is expected to benefit from improved external environment and positive response to the NETR and NIMP 2030 while the government continues with its expansionary fiscal policy to dirive economuc growth. Meanwhile, it is noteworthy that Malaysia's labour market has been growing from strength to strength with unemployment rate coming in at a decade-low of 3.1% as at Jan 2025, compared to 3.3% in Jan 2024. Notable, we are encourage by the persistent growth in employment market outpacing the growth in labour force, lifting the labour participation rate to a record high of 60.6% in Jan 2025. This will certainly reinforce the positive economic outlook in 2025 given that domestic demand forms the bulk of our economy.
Well-positioned to navigate trade protectionism
The US' trade protectionism has been escalating since his inauguration in Jan 2025 with more tariffs being imposed on its top trading partners despite the concerns of a tariff-induced slowdown. Admittedly, Malaysia is a small, open trading nation which will invariably be impacted by changes in the global trade landscape, but Malaysia's diversified export composition and non-aligned policy that prioritises economic cooperation and integration will stand it in good stead. As the ASEAN chair in 2025, Malaysia is poised to seize the opportunity to weild its influence to strengthen the ASEAN economic bloc with better regional intergration to enhance overall economic resilience amidst rising trade protectionism and external uncertainties. In addition, Malaysia's record high approved investments of RM378.5n (+15% y-o-y) in 2024 signals its appealing value proposition for investors which will in turn generate positive spillover effects.
Growth Momentum remains intact
We are optimistic of Malaysia's economic otlook, and project 2025 GDP growth to come in at a stellar 4.7% which is in line with the government's forecast. Fundamentals remain strong as Malaysia's economy continues to take comfort from its resilient domestic demand, underpinned by sustained household spending. Key downside risks include slower-than-expected recovery in external demand and heightened geopolitical tensions.
