PETALING JAYA: Malaysia’s economy looks primed to smash expectations, with recent high-frequency data suggesting the growth appears capable of topping 6% in the fourth quarter of financial year 2025 (4Q25).
The strong momentum may carry into subsequent quarters this year, even as Malaysia and the world are set to experience the full-year impact of United States’ punitive import tariffs.
Official gross domestic product (GDP) figures are scheduled for release today, and while the Statistics Department’s advance estimate points to a 5.7% growth, some analysts are betting on higher rates.
TA Research, for one, thinks the growth may have crossed 6% year-on-year (y-o-y) in 4Q25.
“No major downside risks have emerged from either the domestic or external fronts, and we expect the Malaysian economy to sustain its growth momentum into the final quarter of last year.
“Growth should be supported by seasonal spending factors, including cash assistance under the Sumbangan Asas Rahmah programme, year-end holiday travel, and stronger tourism-related expenditure,” TA Research said in a note.
However, Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid told StarBiz that the final fourth-quarter GDP print may settle at 5.7%, which is in line with consensus forecasts.
“Data points such as the Industrial Production Index, Index of Services, Construction Work Done and crude palm oil production have been accelerating at a healthy pace.
“At the same time, we have seen the unemployment rate continue to remain low at 2.9% during November and December last year,” he said.
“I must say that the numbers suggest that the Malaysian economy is resilient.
“The ongoing implementation of economic and institutions reforms is also healthy for public confidence which should be conducive for the Malaysian economy to withstand the downside risk from abroad.”
TA Research pointed out that the domestic economy is also buoyed by the distributive trade performance. The Distributive Trade Index, a proxy for personal consumption expenditure on the demand side, recorded a significant increase, rising 5.8% y-o-y in 4Q25 from 4.8% in 3Q25.
The growth was mainly driven by motor vehicles, which posted an 8.4% y-o-y increase, followed by wholesale trade (6.6%) and retail trade (4.6%), respectively.
“In terms of value, it totalled RM163.7bil in December 2025, an increase of 7.6% y-o-y amid school holidays, as well as Christmas and New Year festivities.”
In a separate note, Hong Leong Investment Bank (HLIB) Research projected the 4Q25 GDP growth to come in at 6%, above 3Q25’s 5.2%
It said growth is expected to be propelled by the stronger manufacturing, services and agriculture sectors, alongside sustained construction activity.
“On the demand side, private consumption is anticipated to remain the key growth driver. This is supported by continued strength in the labour market, with the unemployment rate at 2.9%, below the pre-Covid-19 level of 3.3%.
“Following this, we forecast 2025 GDP growth to come in at 5% (2024: 5.1%), exceeding the Statistics Department’s advance estimate of 4.9% and the Finance Ministry’s official target of 4% to 4.8%.”
MBSB Research noted that the country’s stronger imports, amid the strength in ringgit, will likely limit the positive contribution to economic growth.
Net exports of goods in 4Q25 slipped marginally by 0.6% y-o-y, reflecting a narrower surplus of RM45.8bil. The decline was driven by a sharp rebound in imports.
Although export growth at 11% y-o-y remained relatively strong by historical standards, the pace of expansion still lagged imports.
The research house also said the potential upside boost is limited by the more moderate growth in the construction activities and mining output.
“In the short run, we expect GDP growth will be relatively more moderate going into 2026 due to high base effect and fading front-loading activities.
“We maintain a cautious outlook as sentiment and activities could be affected by heightened geopolitical risks, while potential trade barriers pose a significant threat to the stability of global trade and supply chain activities.”
HLIB Research maintained its 2026 GDP growth forecast at 4.5%, which sits at the upper end of the official forecast of 4% to 4.5%. This is predicated on continued strength in private consumption and investment as well as the ongoing global tech upcycle.
As for TA Research, it said it is maintaining its GDP growth forecast for 2026 of 4.3% to 4.7% y-o-y at this juncture, supported by resilient domestic demand, underpinned by Visit Malaysia Year initiatives, steady income and employment growth, and a continued recovery in external trade performance.
“Any revision to our 2026 outlook will be assessed after the release of the final 4Q25 GDP figures.”
Given current developments, Bank Muamalat’s Mohd Afzanizam said Bank Negara Malaysia would be more inclined to keep the overnight policy rate (OPR) steady for the rest of 2026.
“Consistency in policy implementation would mean the fiscal deficits target will be on track thereby reducing the credit risk. These will all be ringgit-positive.
“We are projecting 2026 GDP growth of 4.6%. Our previous forecast was at 4.1% while OPR would be maintained at 2.75%.”
