KUALA LUMPUR, May 17, 2025 — The International Monetary Fund (IMF) has revised Malaysia's 2025 GDP growth forecast downward to 4.1%, a decrease from its earlier projection of 4.7%. This adjustment reflects the IMF's assessment of increasing global trade uncertainties and the potential repercussions of newly imposed U.S. tariffs on Malaysian exports.
The IMF highlighted that significant policy shifts are reshaping the global trade landscape, reigniting uncertainty and testing the resilience of economies worldwide. Since February, the United States has announced multiple waves of tariffs against trading partners, leading to market volatility and concerns over global economic stability.
In response to these challenges, the IMF emphasized the importance of sustained fiscal consolidation for Malaysia. The organization urged the Malaysian government to continue rebuilding fiscal buffers and to implement structural reforms to enhance economic resilience. This includes the gradual phasing out of remaining fuel subsidies and the achievement of a small structural primary balance by 2027, as outlined in the Fiscal Responsibility Act.
Despite the downward revision, the IMF acknowledged Malaysia's strong external position in 2024, which was assessed to be stronger than the level implied by medium-term fundamentals and desirable policies. This favorable assessment provides an opportunity for Malaysia to strengthen macroeconomic policy buffers and accelerate structural reforms to support sustainable growth.
The IMF also noted that inflation in Malaysia, which eased to 1.8% in 2024, is projected to rise to 2.6% in 2025 due to expected subsidy reforms, before moderating to 2.3% in 2026. These projections underscore the need for careful policy calibration to balance growth and inflation objectives in the face of external headwinds.
As Malaysia navigates these complex global dynamics, the IMF's revised forecast serves as a reminder of the importance of proactive policy measures to safeguard economic stability and promote long-term growth.
