A strategic approach to trade and domestic development will help sustain growth momentum in 2025

Published on 05 Mar 2025.

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The Malaysian economy recorded a robust growth in 2024, expanding by 5.1% (2023: 3.6%), in line with the official target and RAM’s forecast. Economic momentum was supported by broad-based improvements across all sectors following sluggish performance in 2023. Private consumption remained a key growth driver, supported by a healthy labour market with low unemployment rate (end-2024: 3.1%) and easing inflation rate (2024: 1.8%). A positive turnaround in trade activities amid global tech upcycle also provided greater strength to the overall Malaysian economy. 

RAM Ratings has maintained its projection for Malaysia’s GDP growth in 2025 at 4.0%-5.0%. While overall GDP growth moderated to 5.0% in 4Q 2024 (3Q 2024: 5.4%; 2Q 2024: 5.9%), it remains close to Malaysia’s long-run average growth (2011-2019) of 5.1%, reflecting our expectations of a sustained growth path. Economic growth this year will remain anchored by domestic demand, with private consumption receiving some upside support from the minimum wage hike in the private sector effective February 2025, as well as the civil servants’ salary adjustments implemented last December. Both public and private investments are also expected to drive further growth amid continued rollout of multi-year infrastructure projects and greater realisation of approved investments. While we project headline inflation to trend higher and average between 2.0%-3.0% in 2025, primarily due to the RON95 petrol subsidy retargeting and upcoming electricity tariff adjustments in 2H 2025, we expect the impact on overall spending to be limited. This is given the government’s commitment to providing targeted subsidies for 85% of the population.

The ramping up of US trade protectionist policies and the continued softening of global trade momentum pose risks for Malaysia’s growth in 2025. The IMF has recently adjusted its global trade growth forecast downwards by 0.2ppts for 2025, underscoring escalating pressures from sweeping protectionist measures that would hinder global trade activity. The continued broadening of import tariffs by the US to a larger spectrum of goods also threatens to dampen Malaysia’s trade outlook. In particular, if the US imposes the 25% import tariff on semiconductors that was mooted by President Trump, it will take a toll on Malaysia’s exports. This is given that more than 50% of the country’s exports to the US are electrical and electronics (E&E) goods.

Amid a challenging global trade landscape, strengthening domestic development and diversifying trade partnerships while upholding geopolitical neutrality, will help support growth in the face of US tariff threats. The recent establishment of the Johor-Singapore Special Economic Zone (JS-SEZ) represents a pivotal move to catalyse further growth and investments. The JS-SEZ has laid a strong foundation and will help to draw out the innate potential of Johor. That said, tangible improvements on the ground, such as expediting infrastructure upgrades, remain crucial. Realising the full potential of JS-SEZ will require continuous support and effective execution to ensure that the strong economic ambitions are translated to an equally strong implementation of plans.

Read the full Quarterly Economic Update report here.

 

Analytical contact
Tan Wan Ying
(603) 3385 2540
wanying@ram.com.my    

Nur Nadia Mazlan
(603) 3385 2513
nadia@ram.com.my

Woon Khai Jhek, CFA
(603) 3385 2512
khaijhek@ram.com.my

Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my

 

About RAM Rating Services Berhad (RAM Ratings)

Established in 1990, RAM Ratings is a leading credit rating agency registered under the Securities Commission’s Guidelines on Credit Rating Agencies. In addition to the provision of credit ratings for corporate bonds and sukuk and their issuers, RAM Ratings also provides research and publications on Islamic finance, fixed income and macro-economic and industry analysis as well as data analytics relating to credit risk, counterparty assessments and other related domains. 

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