Malaysia's economy likely lost momentum in first quarter, trade risks weigh
BENGALURU, May 14 (Reuters) - Malaysia's economy likely grew at its slowest pace in a year in the first quarter, losing momentum due to weakened household consumption and exports, according to a Reuters poll of economists.
Advance, opens new tab estimates showed that key sectors, including services and manufacturing, expanded more slowly than in the previous quarter as consumers tightened spending and export momentum faded amid U.S.- China trade tensions.
Southeast Asia's third-largest economy expanded 4.5% in the first three months of the year compared to the prior-year period, according to the May 8-13 poll of 21 economists, in line with a preliminary estimate released in April.
The economy grew 5% in the fourth quarter.
"The higher frequency data such as retail sales, car sales, loan growth and imports of consumer goods are moderating relative to Q4 2024. This is an indication that consumption is likely to be on the softer side," said Ahmad Nazmi Idrus, head of economics at CGS International Securities.
Maintaining growth momentum this year would be difficult due to uncertainty from the global trade war, he said.
In April, economists lowered Malaysia's 2025 consensus growth forecast to 4.3% from 4.7% earlier in the year, citing trade tensions and weaker domestic consumption, while the International Monetary Fund (IMF) has cut its forecast to 4.1%.
Malaysia faces a duty of 24% on exports to the United States starting in July unless a bilateral deal is reached.
Prime Minister Anwar Ibrahim said this month the U.S. government had agreed to further negotiations, but the economy was unlikely to meet its 4.5%–5.5% 2025 growth target due to the trade war.
The U.S. and China - Malaysia's two major trading partners - agreed a temporary 90-day truce on tariffs this week, but risks to economic growth remain.
In response to a weaker outlook, Bank Negara Malaysia (BNM) has announced a reduction to the statutory reserve requirement (SRR) ratio of 100 basis points to 1.00%, effective Friday, which will inject roughly 19 billion ringgit ($4.4 billion) into the banking system.
Economists have also adjusted their outlook on interest rates, now forecasting one rate cut in 2025 in a Reuters poll, from an earlier projection that rates would remain flat at 3% this year.
"Escalating...trade tensions under a second Donald Trump administration, which have resulted in higher and more widespread U.S. tariffs than those imposed during his first term, could prompt BNM to ease monetary policy more," DBS economist Chua Han Teng, said.
($1 = 4.3150 ringgit)
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