MARC Ratings Bhd chief economist Ray Choy
KUALA LUMPUR: Malaysia will stand to benefit from broad-based tariffs by the United States, at least in the short term, said MARC Ratings Bhd.
Its chief economist, Ray Choy, highlighted that trade diversion resulting from US tariffs has benefited Malaysia, ASEAN, and Asia (ex-China).
"The overall trade in ASEAN, including Malaysia, has continued to grow since the impact of Trump’s tariffs in 2018.
"However, the overall prospect for total trade and growth would have been better in a world with fewer tariffs and focus on economic nationalism,” he said in a webinar titled Trumped Expectations: Navigating Policy Shifts and Market Responses in 2025.
As a reference, Choy noted that Vietnam’s exports surged as manufacturers relocated to circumvent high tariffs and costs of doing business, while Taiwan became the alternative supplier of electronic products to the US.
Malaysia’s GDP remains above 5.0 per cent
Regarding gross domestic product (GDP) growth, Choy said Malaysia’s growth is projected to remain above 5.0 per cent in 2025, which is relatively higher than ASEAN growth expectations of 4.5 per cent and China’s expected growth rate of 4.5 per cent.
He also noted that the overall global growth is expected to remain steady, although at a slightly lower rate of 3.2 per cent in 2025.
"US growth is likely to decelerate in 2025 to 2.2 per cent, owing to the cumulative effect of interest rate hikes by the US Federal Reserve (Fed). The expectation of lower interest rates in the US is driven by the higher unemployment rate and a gradual slowdown in overall GDP growth,” he added.
Choy also pointed out that despite challenges in China - a key trading partner for Malaysia - Malaysia’s trade activities have remained resilient alongside ASEAN peers.
Inflation forecast at 2.0 per cent to 3.5 per cent
On inflation, Choy stated the global interest rate environment remains constructive heading into 2025, which would provide an additional boost to Malaysia’s growth, driven by higher investments and trade diversion.
"Over the past four years, we’ve seen a notable increase in investments, which has translated into significant improvements in gross fixed capital formation, a trend we expect to continue into 2025.
"While higher inflation is projected for 2025, its impact will depend on the timing and nature of any future rationalisation measures, particularly regarding petrol prices,” he said.
For 2025, MARC ratings forecasts Malaysia’s inflation at 2.0 per cent to 3.5 per cent.
Sector outlook for 2025
Regarding the sectoral outlook, MARC Ratings chief executive officer Rajan Paramesran said the corporate credit outlook for 2025 is broadly stable and supported by growth and improvement in key sectors.
"Although there have been sharp swings in the ringgit that have led to significant forex gain for some and losses for others, our view is that the uptrend for corporate earnings will continue in 2025,” he said.
He also projected bank borrowings to improve to about 5.5 per cent, benefiting from the healthy economic turnaround, while a total of RM70 billion of sukuk or bonds is estimated to be issued in 2025.
Rajan said that the automotive sector’s total industrial volume (TIV) grew 3.7 per cent year-on-year as at end-October 2024.
"The automotive sector, with interest rates not expected to increase over the near-term, and automotive loan approval is expected to sustain and support total industry volume in the future.
"Domestic players’ ability to quickly adapt to the electric vehicle (EV) hybrid world at competitive price points would be a key going forward,” he said.
Meanwhile, Rajan said data centre growth is expected to benefit other sectors such as construction, telecommunication and utility-related industries.
"We also notice that initially data centres were focused on the Klang Valley, but now the domestic growth is centred in Johor due to spillover from Singapore facilitated by the Johor-Singapore Special Economic Zone (JS-SEZ),” he said.
Rajan added that other key sectors with a stable outlook in 2025 include palm oil, telecommunications, oil and gas, consumer and power. - Bernama
