Malaysia's Economy To Grow 4.5 -5.5 Pct In 2025 - MOF

KUALA LUMPUR, Oct 18 (Bernama) — Malaysia's economy is projected to grow between 4.5 per cent and 5.5 per cent in 2025, against 4.8 per cent and 5.3 per cent in 2024, said the Ministry of Finance (MoF).   

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In its Economic Outlook 2025 report released today, the ministry said the economy is boosted by the services sector, strong private sector expenditure and stable global trade.

The services sector, which is projected to register 5.5 per cent in 2025, has continued to uphold its position as the main driver of growth contributed by tourism activities, sustained exports and acceleration of ICT-related activities.

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Meanwhile, the manufacturing sector is projected to expand further attributed to better performance in export-oriented industries, primarily the electrical and electronics (E&E) segment as external demand for semiconductors continues to increase.

Overall, the MoF said real gross domestic product (GDP) in 2024 is revised upward ranging between 4.8 per cent and 5.3 per cent, surpassing the initial target of 4.0 per cent to 5.0 per cent, supported by favourable economic performance amid persistent challenges in the external environment.

For 2025, headline inflation is projected to remain manageable at between 2.0 per cent and 3.5 per cent in 2025, with the easing of global supply constraints and the moderation of global commodity prices.

"However, some upward inflation pressure could emerge from anticipated domestic policy measures," the MoF said, adding that the Producer Price Index is expected to moderate following the stable production activities.

On the income side, the compensation of employees (CE) is anticipated to grow supported by, among others, the implementation of the new minimum wage rate and upward salary revision for civil servants.

Labour Market

The labour market is projected to remain stable in 2025, in tandem with better economic growth prospects anticipated in both domestic and external fronts.

The MoF said strategies to address structural issues in the labour market, particularly related to wages and productivity, were expected to enhance business efficiency and boost labour demand.

"Hence, the unemployment rate is forecast to improve further to 3.1 per cent in 2025. Total employment is projected to record a growth of 2.1 per cent to 16.6 million persons, with more than 80 per cent of employment opportunities concentrated in the services and manufacturing sector," the ministry said.

Labour productivity is projected to rise by 2.7 per cent to RM101,700 next year spearheaded by wider adoption of advanced technologies, digitalisation and modern management practices across enterprises to enhance value chains, particularly in the high growth high value industries.

Government remains committed to fulfil long-term vision and inclusive growth

Prime Minister Datuk Seri Anwar Ibrahim, who is also the Finance Minister, said the government remained resolute in fulfilling its long-term vision of sustainable and inclusive growth, while the MADANI Economy framework would continue to serve as the government's guiding blueprint for economic policies and reforms.

 "By fostering a competitive and innovative economy, improving public sector efficiency and promoting social equity, we aim to create a prosperous future for all Malaysians. The collective efforts of the government, private sector and rakyat are paramount towards realising this vision," he added.

Anwar said the government also made significant strides in fiscal consolidation, as the fiscal deficit is anticipated to narrow to 4.3 per cent of GDP in 2024 and would further improve to 3.0 per cent in the medium-term.

He added that the government's commitment to prudent debt management and the transition to targeted subsidies were central to fiscal reform, ensuring a sustainable and strong financial position for Malaysia, providing a secure foundation for Malaysia's future economic growth. 

Malaysia private and public consumption to grow in 2025

Accounting for about 60 per cent of the economy, private consumption is projected to continue spearheading growth. 

Private consumption is expected to increase by 5.9 per cent, mainly attributed to the improvement in disposable income, and this will be supported by sustained economic activities and robust labour market conditions, as well as the implementation of the Public Service Remuneration System (SSPA).

The MoF said other contributory factors include continued targeted cash assistance programmes, which will further support household spending in 2025

Meanwhile, domestic demand is expected to expand by 6.1 per cent next year, buoyed by private sector expenditure, growing by 6.6 per cent.

 "With strong consumption and investment spendings, the private sector contribution to GDP growth will remain high at 5.1 percentage points," it said.

 It added that public expenditure will grow by 4.1 per cent and contribute 0.7 percentage points to GDP growth. 

In terms of public consumption, the sector is projected to rise by 3.8 per cent driven primarily by increased spending on emoluments following the implementation of the SSPA.

Sectoral Growth in 2025

The MoF said prospects for the agriculture sector remained positive supported by higher production of crude palm oil (CPO) and demand from food-related industries.

The performance of the agriculture sector is expected to remain stable in 2025, with a growth of 1.9 per cent supported by all subsectors, except forestry and logging.

The MoF said the oil palm subsector is poised to increase at a modest pace, underpinned by high fresh fruit bunch production and yield, following larger oil palm harvestable areas, favourable weather conditions and better labour market.

The ministry said the CPO price is forecast to stabilise within the range of RM3,500 and RM4,000 per tonne in view of better global production and, in addition, higher global output of soybean oil and steady demand for the commodity from major importing countries are anticipated to contribute to the price stabilisation.

The rubber subsector is also projected to grow, underpinned by an increase in natural rubber output particularly from the smallholder segment, which remains the largest contributor to total production.

 "This is also backed by sustained economic growth which will provide better employment opportunities for the rakyat," the MoF said.

Amid stable global economic growth, the manufacturing sector is expected to strengthen by 4.5 per cent next year, mainly driven by implementation of major policies such as the New Industrial Master Plan 2030 and National Semiconductor Strategy.

The MoF said both domestic and export-oriented industries continued to uphold the sector's performance in line with resilient domestic demand and favourable external environment.

On the contrary, the mining sector is forecast to decline marginally due to scheduled plant shutdown for maintenance purposes.

The mining sector is forecast to contract by 1.0 per cent in 2025, following sluggish performance in key subsectors, including natural gas which is projected to decline as output decreases mainly due to the planned shutdown of two facilities in Sarawak for maintenance purposes and moderating demand from major importing countries including Japan and China.

The MoF said the overall production of natural gas is expected to remain below the 2024 capacity, despite several new plants being scheduled to commence operations including the Bindu Field in Terengganu, and Gumusut-Kakap-Geronggong-Jagus East in Sabah.

In terms of prices, Brent crude oil is projected to average between US$75 (RM323) and US$80 (RM344) per barrel in 2025. 

Meanwhile, the construction sector is forecast to register a growth of 9.4 per cent in 2025, largely driven by the acceleration of strategic infrastructure projects.

The MoF said the sector is expected to benefit particularly from civil engineering activities such as LRT3 phase two and the phase two of Sarawak-Sabah Link Road.

Furthermore, the residential buildings sector is anticipated to expand, driven by sustained demand for affordable housing as underlined by the MADANI Economy framework, alongside new development projects by the private sector.

-- BERNAMA