Malaysia’s economy likely grew at its slowest pace in a year during the first quarter, dragged down by weaker consumer spending and declining exports, a Reuters poll of economists showed.
Preliminary government data revealed that key sectors such as services and manufacturing expanded at a slower pace compared to the previous quarter. Economists said this slowdown reflected more cautious household spending and reduced export activity amid ongoing U.S.-China trade tensions.
According to a Reuters survey conducted from May 8 to 13, the economy likely grew by 4.5% in the January–March period compared to the same time last year. This figure matches the government’s earlier estimate. In contrast, Malaysia’s economy grew 5% in the final quarter of 2024.
“Indicators such as retail sales, car sales, loan growth, and imports of consumer goods have slowed since the last quarter,” said Ahmad Nazmi Idrus, head of economics at CGS International Securities. “This suggests consumption is softening.”
He warned that keeping growth steady this year will be challenging due to global trade uncertainties.
Outlook for 2025
In April, economists lowered Malaysia’s 2025 growth forecast to 4.3%, down from 4.7% at the start of the year. The International Monetary Fund (IMF) also revised its projection to 4.1%. Both cuts reflect concerns over trade tensions and slowing domestic demand.
Malaysia could also face new trade barriers. A 24% duty on exports to the United States is set to begin in July unless a new agreement is reached. Prime Minister Anwar Ibrahim recently said the U.S. had agreed to resume negotiations, but acknowledged the country may not achieve its 2025 growth target of 4.5%–5.5%.
While the U.S. and China reached a temporary 90-day tariff truce this week, analysts say risks to Malaysia’s growth remain.
In a move to support the economy, Bank Negara Malaysia (BNM) reduced the statutory reserve requirement (SRR) ratio by 100 basis points to 1.00%, effective Friday. This change will inject around 19 billion ringgit ($4.4 billion) into the banking system.
Economists now expect BNM to cut interest rates once in 2025, revising earlier forecasts that rates would hold steady at 3% throughout the year.
Chua Han Teng, an economist at DBS, said rising trade tensions under a possible second Donald Trump presidency could push BNM to ease monetary policy further, especially if new tariffs are broader than those during his first term.
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