Bank Negara Malaysia governor Datuk Seri Abdul Rasheed Ghaffour: We have already observed signs of front-loading in E&E exports as firms try to soften the impact of tariff-related risks. (Photo by Shahrin Yahya/The Edge)

KUALA LUMPUR (May 16): Bank Negara Malaysia (BNM) expects the front-loading of exports — especially in the electrical and electronics (E&E) sector — to normalise in the coming months, after a temporary uptick as businesses sought to preempt higher tariffs during the 90-day pause announced by the US.

BNM governor Datuk Seri Abdul Rasheed Ghaffour acknowledged that Malaysia is also benefiting from the front-loading of purchases as companies sought to circumvent impending tariff hikes under US President Donald Trump’s administration by moving shipments forward.

“We have already observed signs of front-loading in E&E exports as firms try to soften the impact of tariff-related risks,” Abdul Rasheed said at a press briefing on Friday on the country’s economic and financial developments in the first quarter of 2025.

This is evident by the 6% economic growth in March against 3.6% in February and 3.5% in January, bringing a 4.4% expansion in the first quarter.

However, he foresees that “there could be some normalisation happening” soon when the inventories are drawn down and trade flows stabilise.

Abdul Rasheed warned that the overall balance of risk for Malaysia’s economy in 2025 has tilted to the downside amid the short-term support from front-loaded shipments.

“A further dampening in global demand may impact Malaysia’s exports both directly — through weaker demand from the US — and indirectly through slower growth in major trading partners,” he said.

This would have spillover effects on domestic consumption and business sentiment, particularly in export-oriented industries.

Malaysia is relatively shielded in short term
Nevertheless, Abdul Rasheed noted that Malaysia is relatively shielded in the short term, due to three mitigating factors. First, the country’s key export products, including semiconductors, are currently exempt from US tariffs.

Next, only a significant portion of Malaysia’s exports (83%) are price inelastic, such as electrical machinery and optical equipment, meaning demand is less sensitive to price changes.

Further, recent engagements with 36 companies showed 69% of them were either unaffected or positively impacted, citing limited US exposure, front-loaded inventory builds or product exemptions.

For 2025, Abdul Rasheed indicated that there could be a revision to the country’s gross domestic product forecast of 4.5%–5.5%, pending greater clarity on the global trade landscape.

“We expect growth in 2025 to be slightly lower than earlier projected,” he said. “A revised forecast will be announced in the coming months once there is more clarity on the global trade environment.”

BNM also noted that headline inflation in the first quarter of 2025 averaged 1.5%, while core inflation came in at 1.9%. Full-year inflation is expected to stay below 3%, aided by easing global cost pressures and stable domestic demand.