KUALA LUMPUR, May 2025 — Malaysia’s economy expanded at a slower pace in the first quarter of 2025, posting a growth rate of 4.5%, down from 5.0% in the final quarter of 2024. The moderation reflects growing external headwinds and softening household consumption, according to data compiled from a recent Reuters poll of economists.
External Trade Pressures Mount
The decline in growth is largely attributed to continued volatility in global trade, especially the prolonged economic tensions between the United States and China, two of Malaysia’s largest trading partners. Exports have been hit by weaker global demand, contributing to the deceleration of the country’s overall economic momentum.
Meanwhile, consumer spending, traditionally a key growth driver, has been impacted by elevated inflationary pressures and tighter household budgets.
IMF Lowers Malaysia’s Growth Outlook
In response to the slowing indicators, the International Monetary Fund (IMF) revised Malaysia’s 2025 GDP growth forecast to 4.1%, down from earlier projections. This is also below the Malaysian government’s target range of 4.5%–5.5%, sending a cautious signal to both investors and policymakers.
Bank Negara Responds with Liquidity Measures
To counteract the headwinds, Bank Negara Malaysia (BNM) stepped in with a decisive move, cutting the Statutory Reserve Requirement (SRR) by 100 basis points to 1.00%. This is expected to inject RM19 billion into the banking system, making lending more accessible and encouraging private sector growth.
The move is welcomed by businesses, especially SMEs and startups, as it may ease financing bottlenecks and boost market confidence during an uncertain global climate.
Strategic Outlook: Steady but Watchful
Despite the short-term slowdown, Malaysia’s medium-term economic prospects remain stable. Analysts suggest that digital innovation, diversified trade partnerships, public-private collaborations, and infrastructure investments will be pivotal in driving the next growth phase.
As Malaysia navigates the evolving global economic landscape, a balance between near-term stimulus and long-term reforms will be critical to ensuring inclusive, sustainable growth.
