Economists dial back Malaysia's 2025 growth forecast amid softer household demand
BENGALURU, May 14 — Malaysia's economy likely grew at its slowest pace in a year in the first quarter, losing momentum due to weakened household consumption and exports, according to a Reuters poll of economists.
Advance estimates showed that key sectors, including services and manufacturing, expanded more slowly than in the previous quarter as consumers tightened spending and export momentum faded amid US–China trade tensions.
Southeast Asia's third-largest economy expanded 4.5 per cent in the first three months of the year compared to the prior-year period, according to the 8–13 May poll of 21 economists, in line with a preliminary estimate released in April.
The economy grew 5 per cent in the fourth quarter.
'The higher-frequency data such as retail sales, car sales, loan growth and imports of consumer goods are moderating relative to Q4 2024. This is an indication that consumption is likely to be on the softer side,' said Ahmad Nazmi Idrus, head of economics at CGS International Securities.
Maintaining growth momentum this year would be difficult due to uncertainty from the global trade war, he said.
In April, economists lowered Malaysia's 2025 consensus growth forecast to 4.3 per cent from 4.7 per cent earlier in the year, citing trade tensions and weaker domestic consumption, while the International Monetary Fund (IMF) has cut its forecast to 4.1 per cent.
Malaysia faces a duty of 24 per cent on exports to the United States starting in July unless a bilateral deal is reached.
Prime Minister Datuk Seri Anwar Ibrahim said this month the US government had agreed to further negotiations, but the economy was unlikely to meet its 4.5–5.5 per cent 2025 growth target due to the trade war.
The US and China – Malaysia's two major trading partners – agreed a temporary 90-day truce on tariffs this week, but risks to economic growth remain.
In response to a weaker outlook, Bank Negara Malaysia (BNM) has announced a reduction to the statutory reserve requirement (SRR) ratio of 100 basis points to 1.00 per cent, effective Friday, which will inject roughly RM19 billion into the banking system.
Economists have also adjusted their outlook on interest rates, now forecasting one rate cut in 2025 in a Reuters poll, from an earlier projection that rates would remain flat at 3 per cent this year.
'Escalating... trade tensions under a second Donald Trump administration, which have resulted in higher and more widespread US tariffs than those imposed during his first term, could prompt BNM to ease monetary policy more,' said DBS economist Chua Han Teng. — Reuters
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