11-08-2025
Household spending, services forecast to bolster economy
PETALING JAYA: Malaysia's economic momentum is expected to hold firm into the second half of this year (2H25), buoyed by resilient domestic demand, targeted policy support, and a recovering tourism sector, even as external headwinds from global trade tensions continue to loom.
Analysts said distributive trade and services activity should remain steady, underpinned by higher household spending capacity from recent monetary easing and fiscal measures.
CIMB Research noted that quarterly growth in distributive trade volume was steady, with growth of 4.3% year-on-year (y-o-y) in the second quarter of this year (2Q25) compared with 4.3% in 1Q25, while overall services volume growth eased to 5% y-o-y versus 5.2% in 1Q25), weighed down by slower expansion in the finance and insurance, transport, and real estate subsectors.
The research house estimates final 2Q25 gross domestic product (GDP) growth at 4.4%, just shy of the advance estimate of 4.5% and matching 1Q25's pace.
'We maintain our 4.3% GDP growth forecast for this year, supported by the reduced 19% US tariff on Malaysia and recent domestic policy measures,' the research house said, adding that downside risks persist from Washington's focus on semiconductor tariffs, which could weigh heavily on Malaysia's electrical and electronics (E&E) sector.
The Statistics Department reported last week that the distributive trade index rose 4.3% y-o-y in June to 162.4 points, unchanged from May's pace.
In value terms, sales accelerated to 4.8% y-o-y to RM153bil, underscoring sustained consumer spending despite a volatile global backdrop.
Kenanga Research said that distributive trade growth averaged 4.9% in 1H25, with wholesale trade up 5.3% and retail trade climbing 5.9%.
It expects momentum to gradually pick up in 2H25, aided by 'rising tourist arrivals, continued domestic demand, and higher government spending in line with seasonal trends'.
The research house added that 'domestic risks appear limited' following the government's move to lower RON95 fuel prices to RM1.99 per litre for 18 million people alongside higher cash handouts, which it said will help ease cost-of-living pressures.
While the research house has maintained a forecast of 4.3% GDP growth for the year, it cautioned that US President Donald Trump's latest threat of a 100% tariff on selected chip imports could add new uncertainty to global trade and exports prospects, particularly for Malaysia's E&E sector.
Meanwhile, TA Research anticipates 2Q25 services GDP growth will come in slightly below the Statistics Department's advanced estimate of 5.3% y-o-y, likely at around 5% y-o-y, but said overall GDP should be in line with the earlier projection.
The research house pointed to stronger-than-expected performances in mining and agriculture, alongside resilient household spending, as key supports.
'All in all, we expect both household spending and services activity to remain on a firm footing in 2H25, underpinned by resilient domestic demand, a robust labour market, lower fuel prices, higher cash transfers, subdued inflation, and the July overnight policy rate cut,' it said.
Meanwhile, BIMB Research kept its distributive trade growth forecast for this year at 5.2%, with retail trade projected to climb 6.6% on the back of 'resilient consumer sentiment and the continued recovery in domestic demand'.
