Malaysia's growth to ease in 2025 as global risks mount: ICAEW
KUALA LUMPUR: Malaysia's economy is expected to expand at a slower pace in 2025, with growth moderating to 4.3 per cent from 5.1 per cent in 2024, according to the ICAEW Southeast Asia Economic Insight: Q2 2025 report.
The moderation reflects weaker external demand, particularly from major trading partners like the US and China, despite a short-lived boost in exports earlier this year.
In April 2025, Malaysia's goods exports jumped 26 per cent year-on-year, largely due to businesses fast-tracking shipments to the US ahead of new tariffs. However, this spike is expected to fade, with export growth forecast to weaken sharply in the second half. The first quarter of 2025 (Q1 2025) saw exports already slow to 1.6 per cent, well below the 7.1 per cent average of the prior three quarters.
Malaysia's goods exports surged by 26 per cent year-on-year in April 2025, driven by businesses front-loading shipments to the US to avoid impending tariff hikes.
However, ICAEW said this is expected to be a temporary boost, with export growth likely to moderate significantly in the second half of the year.
The report noted that goods export growth had already slowed notably to 1.6 per cent year-on-year in Q1 2025, well below the 7.1 per cent average growth rate recorded over the preceding three quarters.
"Despite Malaysia's diversified export base, it remains vulnerable to external shocks, with more than 4 per cent of its GDP and approximately 11 per cent of its gross exports tied to US demand, either directly or indirectly, further underscoring the country's vulnerability to external shocks.
"A blanket US tariff rate of 10 per cent on Malaysian imports, although lower than the initially proposed 24 per cent rate, still poses substantial downside risks for exporters. "Additionally, weaker demand from China, Malaysia's largest export destination, creates further threats to Malaysia's external trade environment," it said.
Datuk Mohammad Faiz Azmi, ICAEW council member and executive chairman of the Securities Commission Malaysia, underscored the importance of regional unity.
Speaking at the Asean Investment Conference 2025, he urged deeper intra-bloc collaboration and investment to help buffer the region against global volatility.
In a time of global uncertainty, working together and investing within the bloc will be key to unlocking the region's potential, he said.
With fiscal space constrained by elevated public debt, Bank Negara Malaysia (BNM) is expected to play a more active role. With inflation steady at 1.5 per cent, the central bank has room to implement a 50 basis-point rate cut later this year to support domestic consumption and investment, ICAEW said.
It also highlighted a clear softening trend across GDP, private consumption, and trade indicators between March 2022 and March 2025, reflecting broader caution in the economy.
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