Kenanga Research has lowered its GDP growth forecast for this year to 4.3%, from 4.8%, due to global trade risks and the slower-than-expected 1Q25 growth.
PETALING JAYA: The real gross domestic product (GDP) growth of 4.4% in the first quarter of this year (1Q25) suggests the Malaysian economy is starting to show early signs of scarring from the ongoing tariff war.
Bloomberg’s consensus forecasts had projected 4.5% growth for the period.
Maybank Investment Bank Research (Maybank IB Research) expects Malaysia’s GDP growth to weaken further in 2Q25, partly due to the high-base effect from 2Q24 (5.9%) and other underlying factors.
As a result, the research house has trimmed its real GDP growth forecast for this year to 4.1%, from 4.3% previously, given the effect of the 2024 GDP revisions and weaker-than-expected 1Q25 performance.
However, the research house noted that downside risks to growth are partly mitigated by the country’s resilient consumer spending following measures to boost income levels, a continued investment upcycle and a recovery in tourism.
A de-escalation of the tariff war could be another plus factor.
Kenanga Research is of the same opinion.
It has lowered its GDP growth forecast for this year to 4.3%, from 4.8%, due to global trade risks and the slower-than-expected 1Q25 growth.
“While the 90-day tariff pause and easing US-China trade tensions offer temporary relief, reaching the 5% growth mark now looks unlikely.
“Commodity-related sectors face price pressures, and global policy uncertainty could dampen business sentiment.
“Our forecast remains sensitive to trade negotiations as a favourable outcome could lift growth,” the research house said.
Last Friday, Bank Negara reported that GDP growth in 1Q25 was supported by expansion across most sectors on the supply side, with the exception of mining.
On the demand side, growth was driven by domestic demand and net exports, which helped offset the impact of inventory destocking.
One silver lining from the weaker growth figure is the potential for inflation to remain subdued, allowing the central bank to ease its overnight policy rate (OPR) when needed, according to Standard Chartered Global Research (StanChart Research).
The research house revised its consumer price index inflation forecast for this year downward to 1.8% from 2.2%, citing lower-than expected inflation to-date and falling oil prices.
“GDP running below potential should also help dampen core inflation going forward.
“We continue to expect Bank Negara to cut the OPR by 25 basis points (bps) in July, with the risk of more cuts (beyond 25bps) in 2025 if (economic) data deteriorates more than expected,” it stated in a report.
StanChart Research also lowered its growth forecast for this year to 4.2%, down from its earlier projection of 5%.
While most economists are slightly bearish on Malaysia’s economic prospects, CGS International Research expects growth could surprise on the upside, as the 90-day tariff grace period would boost local exports – similar to what occurred in 1Q25, especially in March – as well as higher tourism activity.
Hence, the research house has maintained its 2025 GDP growth forecast at 4.2% year-on-year.
Meanwhile, Hong Leong Investment Bank Research (HLIB Research) noted that despite escalating trade tensions and growing global policy uncertainty, the economy has yet to experience significant negative spillovers from tariffs.
“In fact, there is evidence of frontloading in trade activity, as businesses capitalise on the 90-day pause in tariff escalation.
“While these factors have helped cushion the near-term impact, the outlook for the second half of the year (2H25) remains clouded by uncertainty,” the research house said.
HLIB Research also expects Bank Negara to lower the OPR by 25bps in 2H25.
