KUALA LUMPUR: Malaysia's growth in 2025 is projected to remain steady at 5.0%, driven by robust domestic demand and improving business sentiment.
The Standard Chartered Global Research team has revised its 2024 growth forecast upward to 5.2% from 4.8%, reflecting strong momentum during the first three quarters of the year.
In its 2025 economic outlook report, Reverberations, the team predicts global economic growth will remain mostly flat, slowing slightly to 3.1% from 3.2% the year before.
After the US presidential election, the global economy is bracing for new policies from the new administration, including major tariffs on key trading partners like China.
“With China likely to bear the brunt of US tariff policy, Asia’s small open economies could be hit by the spillover in the short term – including trade-reliant economies such as Malaysia.
“Over the medium term, the region is expected to continue to attract strong foreign direct investment as investors seek to diversify their operational capacity and tap new markets,” it said in a statement.
In Malaysia, Standard Chartered noted that private consumption is likely to benefit from a healthy labour market, civil service pay hikes, and the introduction of a flexible pension fund account.
Additionally, private investment is expected to gain support from strong manufacturing interest and non-restrictive interest rates. However, cautious global sentiment and the potential impact of negative US trade policies may dampen investment confidence.
“Despite continued subsidy rationalisation next year, the Standard Chartered Global Research team expects inflation to remain manageable at 2.2% in 2025 versus 1.9% in 2024 given lower-than-expected inflation year-to-date last year.
“As such, the team maintains its view that Bank Negara will keep the policy rate unchanged at 3.0% and any hiking decision by the central bank will be reactive rather than pre-emptive,” Standard Chartered said.
Meanwhile, the ringgit is likely to slightly outperform regional currencies in the near term as fundamental remain supportive.
However, as Malaysia is trade-reliant and exposed to China’s growth, any negative US-led trade policies may pose a risk to the currency in 2025.
“Domestic confidence in the ringgit has improved in 2024. In fact, the Malaysian ringgit was one of the rare few currencies which gained against the US dollar in 2024. Domestic fundamentals remain positive.
“Positioning remains favourable with high onshore foreign currency deposits while the domestic fund management industry’s allocation to foreign assets is already high. Ongoing foreign income repatriation by local institutions and strong inbound tourism activity could also benefit the ringgit,” it said.
