2Q 2025 GDP likely to grow 4.5-5.5% amid tariff rush

The Star

4 days ago

KUALA LUMPUR: Economists have projected the Malaysian economy to expand between 4.5 per cent and 5.5 per cent in the second quarter of 2025 (2Q 2025), driven partly by increased export demand, especially from the United States (US) importers due to heightened fears of impending tariff in August.
Putra Business School Associate Professor Dr Ahmed Razman Abdul Latiff said the service, manufacturing and construction sectors are likely to contribute the most to 2Q 2025 growth.
"I expect Malaysia's 2Q gross domestic product (GDP) to show growth. There is also a possibility that the mining and agriculture sectors would make a higher contribution to the economy," he told Bernama.
The Statistics Department Malaysia (DOSM) is scheduled to announce the advance GDP estimates for 2Q 2025 on Friday, July 18, followed by an Aug 15, 2025 official announcement.
However, Ahmed Razman cautioned that the growth momentum could decelerate in the second half of the year (2H 2025) once the US tariff comes into effect.
Nevertheless, the recent reduction of the overnight policy rate (OPR) might catalyse the domestic market to generate higher demand for products and services, he said.
On July 9, Bank Negara Malaysia's (BNM) Monetary Policy Committee (MPC) reduced the OPR by 25 basis points to 2.75 per cent, a pre-emptive measure to preserve Malaysia's steady growth path amid moderate inflation prospects.
BNM last kept the OPR at 2.75 per cent in March 2023. It was increased to three per cent in May 2023.
Sharing similar views, Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said front-loading activities may benefit Malaysia's external sector.
"We have seen exports to the US jump 33.6 per cent in the first five months of 2025.
"This will sustain growth in 2Q 2025 along with Malaysia's full employment status, which will help propel consumer spending, coupled with investment activities in the private sector," he said.
However, Mohd Afzanizam expressed concern that the 2H 2025 economic conditions will be more critical with the US tariff effective Aug 1, 2025.
"We can expect US demand to moderate as Americans will have to pay more for imported goods.
"The growth moderation will be transmitted in the 2H 2025," he said.
Mohd Afzanizam expects 2025 full-year growth to slow to 4.1 per cent against BNM's earlier growth projection of between 4.5 and 5.5 per cent and 2H 2025 GDP to expand to 3.7 per cent.
On July 8, the US unexpectedly imposed a higher tariff of 25 per cent on all Malaysian exports effective Aug 1, 2025, one per cent higher than the 24 per cent announced in April 2025.
While negotiations for lower tariffs are ongoing between Malaysia and the world's largest economy, Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz said BNM is currently analysing this year's economic outlook and the tariff impact, and the official economic outlook remains unchanged. - Bernama