Malaysia growth near forecast in second quarter, but central bank flags tariff uncertainty
Gross domestic product grew 4.4% in the April-to-June period from a year earlier, data from Bank Negara Malaysia and the Statistics Department showed, matching the pace of the first quarter. That was slightly below a Reuters poll forecast of 4.5%, which was also the government's advance estimate.
The economy grew 2.1% on a quarter-on-quarter seasonally adjusted basis, faster than 0.7% growth in the previous three months, the data showed.
BNM said growth was driven by robust household spending and positive labour market conditions, but forecasting was challenging amid the uncertainty from U.S. tariffs.
"Growth could move in different directions... we are operating in a different environment where changes happen very quickly," BNM Governor Abdul Rasheed Ghaffour told a press conference.
A 19% tariff on Malaysian exports to the United States took effect earlier this month, although some goods remain exempt pending a review of U.S. laws.
Of particular concern to Malaysia is President Trump's flagging of a 100% tariff on semiconductor imports from companies that do not have a U.S. manufacturing footprint or plans to establish one.
Malaysia, a major player in the global semiconductor supply chain, has warned that tariffs on its chip exports to the United States would have a significant impact on its economy.
Total export growth is expected to be moderate in the second half of 2025, though there would be support from demand for electrical and electronic goods and higher tourism, Abdul Rasheed said, adding that visitor arrivals had recovered to pre-pandemic conditions.
Last month, the central bank lowered its growth forecast for 2025 to a range of 4% to 4.8% from 4.5% to 5.5%, which Abdul Rasheed said was "broad enough" to cover different outcomes arising from the U.S. tariffs.
The bank also cut interest rates for the first time in five years in July to "pre-emptively preserve" the export-oriented economy's growth.
Mohd Afzanizam Abdul Rashid, chief economist at Bank Muamalat Malaysia, said the rate cut and a narrower fiscal deficit would give authorities some capacity to counter expected slower growth in the second half of the year.
He said the fiscal deficit was 4.2% of GDP in the first half, down from 5.5% of GDP in the same period in 2024.
"This would give them some flexibility to spend on areas relating to cash transfers program which can have an immediate impact on growth," Mohd Afzanizam said.
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