KUALA LUMPUR: OCBC Bank (M) Bhd has revised Malaysia’s gross domestic product (GDP) growth for 2025 to 4.3 per cent from 4.5 per cent on a weaker external demand outlook.
Chief economist and head of global market research and strategy Selena Ling said the adjustment reflects growing concerns over weakening external demand and persistent global economic headwinds.
She said the 4.3 per cent growth projection is based on a 24 per cent reciprocal tariff on Malaysian exports to the US announced in early April.
"But, this is the big caveat, there's downside risk. For Malaysia, semiconductors and electronics and electrical (E&E) exports are very important; it's almost 80 per cent of Malaysia’s total exports to the US.
"So at some point, if the semiconductor tariff does come in, there will be further pressure on growth. Our worst case scenario, we are probably looking somewhere closer to 3.5 per cent,” she told the media during OCBC’s 2025 economic outlook today.
She said the exemptions for semiconductors and associated products have provided some reprieve because about 46 per cent of Malaysia's exports to the US are still exempt from tariffs based on the latest regulations.
This includes E&E appliances products, and encompasses electronic integrated circuits, photovoltaic cells, communication apparatus and automatic data processing machines.
More importantly, the US Trump administration has not ruled out the imposition of a semiconductor tariff, which will impact the economy, she said.
Ling noted that Malaysia's 24 per cent reciprocal tariff rate is lower than Vietnam’s 46 per cent, Cambodia's 49 per cent, Thailand's 37 per cent and Laos’ 48 per cent. This allows it to maintain its relative competitiveness for companies geared towards exporting to the US.
On overnight policy rate (OPR), Ling said Bank Negara Malaysia (BNM) may focus more on supporting economic growth if global and domestic conditions weaken and may pivot towards monetary easing if growth risks become more pronounced.
"We expect rate cuts to come in 2026 to the tune of 50 basis points, but could come earlier if growth risks become more evident sooner,” she said.
Malaysia’s medium-term outlook remains supported by policy initiatives such as the New Industrial Master Plan 2030, National Energy Transition Roadmap, National Semiconductor Strategy, and the Johor-Singapore Special Economic Zone, she said.
"These initiatives are crucial in boosting potential growth, enhancing competitiveness, and building economic resilience,” Ling said.
Short-term pressures on the ringgit are expected to persist but Malaysia’s economic fundamentals and prospects for a softer US dollar could offer support to the local currency in the medium term, she said. - Bernama
