PETALING JAYA: Amid cooling export momentum following a front-loading phase, Malaysia’s economy is navigating a more fragile recovery, weighed down by persistent global trade uncertainties and an uneven domestic rebound, analysts say.
In June, the country’s exports declined further by 3.5% year-on-year (y-o-y), missing a Bloomberg consensus’ forecast of a 5.4% gain.
This marked the second consecutive month of disappointing growth, further affirming the ebbing of front-loading activities, analysts said.
Likewise, imports softened to low single-digit growth of 1.2%.
The country’s trade surplus grew to RM8.6bil in June.
The near-term export outlook for Malaysia remains clouded by ongoing uncertainty over global trade and tariff policies, geopolitical risks and evolving domestic policy reforms.
“US President Donald Trump’s tariff announcements over the past two weeks, from July 1, with an extended deadline to Aug 1 for further negotiations, has cast a shadow over Malaysia’s export outlook for the remainder of this year and into 2026 as Malaysia is facing a higher US reciprocal tariff of 25% versus 24% announced on April 2.
“It is also significantly higher than the tariffs slapped on other regional peers such as Indonesia, Vietnam and the Philippines,” United Overseas Bank (M) Bhd (UOB) said in a economics and markets research report yesterday.
Additionally, UOB said the Trump administration’s artificial intelligence-related restrictions and sector-specific tariffs remain unclear and fluid as of now.
“These risks are real and growing, which will be disruptive to supply chains, investment flows and export competitiveness,” the bank added.
On the domestic front, policy changes such as the expanded sales and service tax (SST), new electricity tariff structure, the mandatory 2% Employees Provident Fund contributions for foreign workers, and eInvoicing, are adding pressures to Malaysian businesses, including exporters.
In response, business leaders have urged the government to ease the burden by cutting SST rates and reconsidering the fuel subsidy rationalisation programme.
Similarly, Hong Leong Investment Bank Research (HLIB Research) is maintaining a cautious view for the second half of this year (2H25) due to ongoing tariff risks, plus concerns over sector specific tariffs on semiconductors.
The research house is keeping its gross domestic product (GDP) growth forecast for this year at 4%.
Pending clarity on US-Malaysia tariff negotiations, CIMB Research retained its full-year GDP forecast at 4.3% for this year, noting that the local economy expanded by 4.4% in 1H25, down from 5% in 1H24, reflecting a balanced but cautious growth trajectory.
However, should existing US tariffs of 25% remain in place beyond the Aug 1 deadline, the research house estimates GDP growth could ease further to around 4%.
It noted that front-loading in the United States, Taiwan and South Korea moderated, while shipments to China, the European Union and Asean had weakened amid the tariff uncertainty.
