World Bank cuts Malaysia's 2025 GDP forecast to 3.9%
The downgrade was attributed to the unpredictable macroeconomic effects of higher trade barriers, which the World Bank said could weigh on growth despite having benefited from fiscal policy support such as social spending programmes and public investment.
It also stated that modest fiscal consolidation is expected to continue in Malaysia.
Besides Malaysia, other East Asia and Pacific (EAP) countries also saw notable revisions, with the Philippines and Vietnam each experiencing a 0.8 percentage-point downgrade, with growth forecasts lowered to 5.3 per cent and 5.8 per cent, respectively.
Thailand's projection was cut by 1.1 percentage points to 1.8 per cent, while Myanmar recorded the sharpest downgrade of 4.5 percentage points, bringing its 2025 GDP forecast to -2.5 per cent, said the report.
Global growth is projected to decline to 2.3 per cent in 2025, with a slowdown in most economies compared to last year. This rate of growth will be the slowest since 2008, excluding periods of global recession.
According to the report, Malaysia, which is among the economies with large export-oriented manufacturing sectors, is particularly exposed to a reemergence of trade tensions, higher trade costs, and weaker growth in major economies.
It said gauges of manufacturing activity, including headline manufacturing Purchasing Managers' Indexes (PMIs) and goods trade indicators, have eased recently.
Some trade-exposed emerging market and developing economies (EMDEs), such as Malaysia, have seen the new export orders component of the manufacturing PMI weaken markedly since November amid increasing global trade policy uncertainty, the report said.
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