Malaysia's GDP Growth Likely To Remain Resilient At 4.5 Pct In 2025 - OCBC

KUALA LUMPUR, Jan 16 (Bernama) -- Malaysia’s gross domestic product (GDP) growth is projected to remain resilient at 4.5 per cent in 2025 compared to 5.2 per cent in 2024, driven by strong export performance and sustained domestic demand, said OCBC senior ASEAN economist Lavanya Venkateswaran.

She stated that, on the external front, despite monthly fluctuations, export growth has remained resilient, bolstered by a bottoming in the global electronics export downcycle.

"On domestic demand, household spending remains strong, driven by rising wages and a resilient labour market. Investment spending is also supported by medium-term reform plans, which are crowding in private sector investment."

“These factors will more than offset the pull back in government spending, reflecting the fiscal consolidation agenda,” she said in a statement today.

Meanwhile, she said that the trade surplus will start to stabilise in 2025, barring shocks from the United States (US) tariffs and trade policies.

“The normalising trade surplus, combined with still strong tourist arrivals, suggests that the current account surplus will be sustained.”

Lavanya said the year-to-date 2024 data suggests that tourist arrivals are close to pre-pandemic levels and tourism from China is well ahead of pre-pandemic levels for Malaysia.

“Tourists from China amounted to three million year-to-November 2024, well above pre-pandemic levels, but still lower compared to Singapore (3.2 million), Vietnam (3.7 million), and Thailand (7.6 million), suggesting further room to capitalise on tourist inflows from China,” she said. 

In another development, she said RON95 subsidy is expected to be rationalised by July 2025, with prices rising 20-25 per cent starting from that month.

“We estimate the fiscal savings of 0.5 per cent of GDP. This is similar to the official estimate of RM8 billion or 0.4 per cent of GDP in savings,” she said. 

Lavanya pointed that there are inflationary policies in the pipeline, including raising RON95 prices from mid-2025; 13.3 per cent increase in minimum wages from February 2025; and 7-15 per cent increase in civil servant salaries effective December 2024. 

“Specifically, if the rationalisation of RON95 is implemented as outlined in Budget 2025, we estimate an average inflation higher to 2.7 per cent year-on-year (y-o-y) in 2025 versus 1.8 per cent in 2024,” she said. 

Meanwhile, she said OCBC’s baseline forecast is for Bank Negara Malaysia (BNM) to keep its policy rate unchanged at 3.00 per cent in 2025.

“We expect BNM will be watchful of the persistence and pervasiveness of inflation. Past precedence shows that BNM usually makes changes to the policy rate based on demand-driven, rather than supply-driven, inflationary conditions.

“However, should inflationary pressures become more persistent and pervasive, we do not rule out the possibility for BNM to hike policy rates in 2025,” she said. 

The government aims to narrow the fiscal deficit to 3.8 per cent of GDP in 2025 from 4.3 per cent of GDP in 2024 on the assumption that revenues will grow by 5.5 per cent y-o-y in 2025 (versus 2.3 per cent in the 2024 revised budget estimate) and expenditures will rise by 3.3 per cent y-o-y after remaining flat in 2024.

-- BERNAMA