Bank Negara Malaysia governor Datuk Seri Abdul Rasheed Ghaffour (right) and chief statistician Datuk Seri Dr Mohd Uzir Mahidin at a press conference. Gross domestic product grew 4.4% in January-March compared to the same quarter in 2024, the central bank announced on Friday. (Photo by Shahrin Yahya/The Edge)

KUALA LUMPUR (May 16): Malaysia’s economy decelerated but continued to expand in the first three months of 2025, thanks to resilient household spending and business investments, while exports slowed.

Gross domestic product (GDP) grew 4.4% in January-March compared to the same quarter in 2024, Bank Negara Malaysia (BNM) announced on Friday. The reading matches the official flash estimate of a 4.4% expansion, but lower than the revised 4.9% year-on-year growth in the preceding quarter.

On a seasonally-adjusted basis, GDP rose 0.7% quarter-on-quarter.

Moving forward, “the Malaysian economy is to be affected by changes in global trade policies, though resilient domestic demand will anchor growth”, with the estimate pointing to growth to be slightly lower than an earlier forecast of 4.5%-5.5%, according to the central bank.

On the demand side, private consumption rose 5.0%, while private investment climbed 9.2%, the latest data showed. Public consumption gained 4.3%, while public investment was 11.6% higher. Net exports were up 19.6%.

On the supply side, the services sector — which accounts for more than half of Malaysia’s economic output — expanded 5%, and key manufacturing activity advanced 4.1%. Mining production declined 2.7%, while the construction sector was 14.2% higher.

The overall balance of risk to the country’s economic growth in 2025 is tilted to the downside, according to BNM governor Datuk Seri Abdul Rasheed Ghaffour.

The downside, he said, is due to a deeper slowdown in major trading partners as a result of trade restrictions, weaker sentiment amid higher uncertainties affecting spending and investments, as well as lower-than-expected commodity production.

Meanwhile, Abdul Rasheed said BNM may revise downwards the country’s GDP growth forecast in 2025 from the earlier projection of 4.5% to 5.5%, amid the escalating global trade tensions and policy uncertainties.

“I wish it (the GDP forecast revision) would come within one to two months; [before that] we want to get some clarity and outcome from the current negotiations [on US tariffs] that are taking place,” Abdul Rasheed said at a press conference.

Despite the revised outlook, the governor said that Malaysia is approaching the challenges from a position of strength, with policy tools available to cushion external shocks.

“Overall, while we see risk and uncertainty, we are vigilant and ready to tackle these challenges. We are in a position of strength, and we have the policy instruments and policy spaces to help if we need to,” he noted.

Inflation outlook remains moderate in 2025
BNM also reported that headline inflation eased to 1.5% in the first quarter, while core inflation — which strips out volatile items — edged up slightly to 1.9%. The lower headline reading was driven by a decline in utility and mobile services prices, partially offset by higher rental inflation.

Looking ahead, inflation is expected to remain moderate throughout the year, supported by benign global cost conditions and an absence of excess domestic demand, BNM said.

“New inflation forecasts will likely be announced as well as we review the updated GDP projections in the near future,” the governor added, saying the overall effect of the announced domestic policy reforms on inflation is expected to be limited.

He added that current domestic policy reforms are not expected to result in significant price pressures, although upside risks remain amid higher global commodity prices due to supply chain disruptions and financial market volatility feeding into external cost conditions, among others.