Above-target Q4 growth shows Malaysia’s economy robust amid global turmoil, analysts say

Above-target Q4 growth shows Malaysia’s economy robust amid global turmoil, analysts say



A file photograph shows workers at a construction site in Kuala Lumpur, on October 12, 2023. — Reuters pic

Friday, 14 Feb 2025 6:02 PM MYT


KUALA LUMPUR, Feb 14 — Malaysia’s fourth-quarter 2024 gross domestic product (GDP) growth of 5.0 per cent, leading to a full-year expansion of 5.1 per cent, reflects a strategically resilient economy leveraging domestic strengths amid global uncertainties, according to AmBank Group.

Its chief economist, Firdaos Rosli, attributed this growth to key factors such as a strong labour market with an unemployment rate of 3.1 per cent and controlled inflation at 1.8 per cent.

He noted that these conditions have supported private consumption, evident in the rise of credit card disbursements.

“Despite various supply-side changes such as water rate adjustments, service tax review, and diesel subsidy rationalisation, inflation remained low, which is a testament to the effective economic and fiscal management without hindering growth,” he told Bernama.

The full-year GDP growth aligned with AmBank Group’s earlier projection.

Firdaos also highlighted that Bank Negara Malaysia’s (BNM) decision to maintain the overnight policy rate (OPR) at 3.00 per cent has fostered a stable monetary environment, bolstering economic growth. He added, “We expect it to remain steady for some time.”

Looking ahead, he said that Malaysia’s growth trajectory in 2025 — forecast at 4.6 per cent by AmBank Group — will depend on balancing domestic resilience with external challenges.

Private consumption, festive demand, and an ongoing investment upcycle provide a solid foundation. However, external headwinds — such as potential US tariffs and global trade slowdowns present downside risks.

Additionally, wage growth is expected to be favourable, driven by the civil service salary review in December 2024 and an increase in the minimum wage.

“Strategic policy measures will be critical to mitigate these challenges, particularly in the ongoing diversification to enhance export markets.

“While Malaysia’s growth outlook remains positive, maintaining momentum will require insights and strategies to navigate the volatile global landscape,” added Firdaos.

Echoing these sentiments, UOB Kay Hian Wealth Advisors Sdn Bhd head of investment research Mohd Sedek Jantan emphasised that Malaysia’s investment environment remains robust, with confidence from both domestic and foreign investors.

The Johor-Singapore Special Economic Zone agreement, signed in January 2025, strengthens Malaysia’s positioning as a regional investment hub, while the Iskandar Regional Development Authority’s RM223 billion target for 2024-2028 signals long-term growth potential.

“However, execution risks loom large — historically, Malaysia’s foreign direct investment realisation rates have lagged behind commitments, highlighting the need for policy certainty and streamlined approval processes,” he said.

He also noted that Malaysia’s fiscal trajectory appears stable, with Budget 2025 targeting a reduction in the deficit to 3.8 per cent of GDP.

The Public Finance and Fiscal Responsibility Act 2023 is a positive step, but the effectiveness of planned revenue measures, including dividend taxation and expanded Sales and Service Tax, remains uncertain. He added: “If global trade slows, revenue underperformance could challenge deficit targets.”

Despite these measures, Mohd Sedek foresees Malaysia’s credit rating outlook will remain sensitive to external shocks. The government’s ability to balance fiscal consolidation with growth-supportive policies will be crucial in preserving investor confidence.

He emphasised that Malaysia’s economic path in 2025 will be guided by three core priorities: policy certainty, trade diversification, and strengthening domestic resilience. These factors will be vital to ensuring stability and driving sustainable growth.

Despite global uncertainties, Malaysia has the necessary strengths to sustain its economic momentum. However, the country’s long-term success will depend on its ability to adapt to a shifting global economic landscape, determining whether it can simply weather external shocks or emerges stronger from them, he concluded.

Last month, Malaysia announced that its exports and imports rebounded to an all-time high in 2024 with trade amounting to RM2.88 trillion, up 9.2 per cent year-on-year, surpassing the RM2 trillion mark for four consecutive years. — Bernama