KUALA LUMPUR: Malaysia's economy moderated for a third consecutive quarter to 4.4% in the first quarter of the year (1Q25), as export growth slowed due to a contraction in the mining sector.
The result was in line with official advance estimates of the gross domestic product (GDP) and marginally lower than the 4.5% median projection by a Reuters poll of economists.
On a quarter-on-quarter seasonally adjusted basis, first-quarter GDP expanded 0.7% against a 0.2% contraction in the previous quarter.
Bank Negara in its report on the country's 1Q economic developments said the quarterly growth was driven by rising domestic demand as household spending was sustained amid positive labour market conditions and income-related policy measures, including the upward revision of minimum wage and civil servant salary.
Meanwhile, the steady expansion in investment activities was supported by the realisation of new and existing projects.
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According to the central bank, supply side growth in 1Q was driven by the services and manufacturing sectors.
"Services sector was supported by higher government services while strong E&E production underpinned the performance in the manufacturing sector.
"However, normalisation in motor vehicle sales and production following strong performances over the last three years affected the growth of services and manufacturing sectors respectively.
"Overall growth was also weighed down by a contraction in the mining sector amid lower oil and gas production."
Bank Negara said Malaysia's growth in 2025 will be affected by an escalation in trade tensions and heightened policy uncertainties
"The rapidly-evolving developments surrounding trade tariffs are expected to affect the global outlook for the rest of the year," it said.
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Bank Negara governor Datuk Seri Abdul Rasheed Ghaffour commented that Malaysia, as a small and open economy, will inevitably face both direct and indirect impact from these tariffs.
"Growth of the Malaysian economy is expected to be slightly lower than the earlier forecast of 4.5% - 5.5% in 2025.
"The high uncertainty surrounding outcomes of trade negotiations and how these will reshape global trade complicates a clear assessment of their impact on growth at this juncture," he said.
During the quarter, the ringgit appreciated 0.8% against the US dollar, primarily driven by the weakening of the US dollar as growing uncertainties over US trade policy resulted in increased expectations of more subdued US economic growth.
The nominal effective exchange rate (NEER) against the currencies of Malaysia’s major trade partners increased marginally by 0.01%.
Bank Negara said in its outlook that growth will continue to be anchored primarily by resilient domestic demand, which provides a strong buffer against external headwinds.
"Household spending is expected to continue expanding, supported by continued wage and employment growth, particularly within domestic-oriented sectors as well as income-related policy measures.
"Investment activities will be driven by the continued implementation of multi-year projects across private and public sectors, further realisation of approved investments with a larger share by domestic players and the implementation of catalytic initiatives under the national master plans
"Additionally, the continued demand for E&E goods, alongside higher tourist receipts will also provide cushion to growth."
Meanwhile, headline inflation in 2025 is projected to remain within a moderate range of 2.0 - 3.5%, driven by further moderating global costs and absence of excessive demand.
