PETALING JAYA: Private consumption will be a key growth driver in 2025, where gross domestic product (GDP) is forecast to grow by 4.5% to 5.5%.
BIMB Securities, in a report, stated while potential headwinds exist, the outlook for 2025 is one of cautious optimism with private consumption expected to drive economic growth and sustain the nation’s economic momentum.
The research house expects private consumption, which remains the primary driver of GDP growth, to expand by 5.4% this year.
“Consumption patterns reveal a strong inclination toward discretionary spending, while expenditures on essentials such as food and communication have moderated,” BIMB Securities said.
It added higher civil servant salaries, expanded cash assistance programmes and a resilient labour market will provide a strong foundation for consumer spending.
BIMB Securities noted policies aimed at boosting household income have been impactful, while the first phase of civil servant salary hikes in December 2024, coupled with a minimum wage increase to RM1,700 starting February 2025, will inject RM13bil into the economy.
“This combination of measures is poised to lift disposable incomes, especially for lower-income households, and bolster consumer spending,” the research house noted.
It said healthy labour market conditions, manageable inflation levels and supportive monetary policies are setting the stage for robust consumption.
Headline inflation eased to 1.7% in December last year, and unemployment rates neared 3.2%, showing the nation is close to full employment.
The realisation of approved investments and government spending initiatives are expected to create more job opportunities.
BIMB Securities added Malaysia’s tourism sector has been resilient, supported by the favourable exchange rate of the ringgit, as well as the visa-free policy for travellers from China and India.
“Malaysia’s tourism industry is poised for a breakthrough year in 2025, building on the exceptional performance of 2024 and driven by a combination of strategic government investments and innovative private sector initiatives,” the research house said.
It noted inflationary pressures will remain an area of focus this year. The planned subsidy rationalisation will likely pose a challenge, while electricity tariff adjustments and higher diesel prices are also expected, albeit with measures to cushion the impact on vulnerable groups.
“The broader implications of these changes will depend on the timing and scale of the reforms, as well as the effectiveness of targeted financial aid programmes. Policymakers must strike a delicate balance between fiscal sustainability and protecting consumer spending power.”
