PETALING JAYA: Malaysia’s economic forecast for 2025 is being maintained for now amid the uncertainties surrounding global trade and implications US tariffs will have on the country’s exports as well as how they will shape supply chains across the world.
Analysts expressed cautious optimism on the country’s economic growth with the Socio-Economic Research Centre (SERC) estimating gross domestic product (GDP) growth at 5% for this year – the mid-point of government forecasts of 4.5% to 5.5%, with domestic demand supporting growth.
SERC executive director Lee Heng Guie said the direct and indirect effects on Malaysia’s exports would depend on the substitutability of the affected goods as well as product costs and price competitiveness.
Of interest would be the reciprocal tariff announcement by US president Donald Trump last Thursday.
He had directed his economic advisers to report to him by April 1 on investigations of the taxes, levies or non-tariff barriers (NTBs) imposed by trade partners on US goods.
Trump has imposed a flat tariff of 25% on all steel and aluminium products.
United Overseas Bank (M) Bhd senior economist Julia Goh pointed out that the situation remained “fluid” as the United States would take a country-by-country approach on tariffs and NTBs.
The tariffs and their imposition would depend on the type of goods while the impact on exports hinged on how sizeable the exposure is and level of the tariffs.
“The negatives are that the tariffs dent demand through the entire supply chain,” she said.
UOB economist Ho Woei Chen said, in a report, that the United States has flagged automotive products, pharmaceuticals and semiconductors for additional tariffs.
“These are expected to have a larger impact on most Asian economies where these high-value products account for a larger share of their respective GDP,” she added.
“For now, it is difficult to assess the impact of reciprocal tariff on Asia’s economy and trade patterns, as the recommendations have yet to be announced.
“Additional limitations and tariffs could hurt overall trade activities and that would have negative impact on Asian countries with heavy reliance on the US market.
“This leaves room for various countries to adjust to the demands of the United States in respect to trade,” Ho said.
According to TA Research, Malaysia could face a risk of moderating economic growth in the first quarter of 2025 (1Q25) primarily due to the subdued external demand momentum.
“Our cautiously optimistic outlook is tempered by persistent global uncertainties including China’s ongoing struggle with economic recovery and the intensifying global trade tensions.
“Given Malaysia’s reliance on key trading partners such as China and the United States, the external risks could weigh heavily on export performance,” the research house said.
It projected 1Q25 GDP at 4.8% on sustained momentum in domestic demand and stable external conditions, citing S&P Global data that GDP growth would remain in positive territory despite moderating.
The research house also forecast full-year GDP to come in at 4.8% of the house’s 4.8% to 5.3% projections.
It said this would be consistent with a steady, albeit cautious, expansion across key sectors, with the January purchasing managers’ index (PMI) at 48.7 – a reading above 50 indicating expansion – which was a slightly faster pace of growth compared with previous months.
“Despite the sub-50 PMI reading, we expect continued year-on-year improvements in official manufacturing production figures in line with broader economic resilience,” the research house said.
Kenanga Research has maintained GDP forecast of 4.8% for this year, with the lower growth estimates reflecting its expectations of normalising domestic economic activities, a high-base effect and rising global economic uncertainties.
The key risk stems primarily from heightened external uncertainties while China’s slower-than-expected recovery could dampen its growth outlook.
A continued recovery in the manufacturing sector and services sector performance supported by higher household incomes as well as increased tourist arrivals would reinforce its growth forecast.
CGS International Securities Malaysia Sdn Bhd economist Mas Aida Che Mansor noted that the trend of front-loading of exports seen in recent months could continue over the next few months and boost 1Q25 economic growth.
“We project Malaysia’s shipments to moderate in the latter part of 2025, as the impact of Trump’s tariffs is likely to be seen over a period of several quarters amid global uncertainties and supply chain readjustments,” she said.
CGS International forecast 4.6% GDP growth for this year.
“We expect there will be more tariffs following an increase in US trade deficit balance in 2024 reported in early February.
“Nonetheless, there could be a potential upside from better shipments if the global supply chain restructuring favours Malaysia.
“The country’s January trade numbers will be released on Feb 20, and we believe growth may remain strong. Overall, we project exports to expand by 3% year-on-year in 2025 (2024: 5.7%),” she pointed out.
