OCBC Bank's Ling said the 4.3% growth projection is based on a 24% reciprocal tariff on Malaysian exports to the United States.
KUALA LUMPUR: OCBC Bank (M) Bhd has revised Malaysia’s gross domestic product (GDP) growth forecast for 2025 to 4.3%, down from 4.5%, due to 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% growth projection is based on a 24% reciprocal tariff on Malaysian exports to the United States, as 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% of Malaysia’s total exports to the United States.
“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%,” she told the media during OCBC’s 2025 economic outlook yesterday.
She said the exemptions for semiconductors and associated products have provided some reprieve because about 46% of Malaysia’s exports to the United States are still exempt from tariffs under the latest regulations.
This includes E&E appliances and encompasses electronic integrated circuits, photovoltaic cells, communication apparatus and automatic data processing machines.
More importantly, the Trump administration has not ruled out the imposition of a semiconductor tariff, which would impact the economy, she noted.
Malaysia’s 24% reciprocal tariff rate is lower than Vietnam’s 46%, Cambodia’s 49%, Thailand’s 37% and Laos’ 48%, she added.
This allows the country to maintain its relative competitiveness for export-oriented companies targeting the US market.
On the overnight policy rate, Ling said Bank Negara may focus more on supporting economic growth if global and domestic conditions weaken, and could pivot toward monetary easing should growth risks become more pronounced.
“We expect rate cuts to come in 2026 to the tune of 50 basis points, but (the cuts) 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 added. — Bernama
