19-05-2025
Experts: 2025 GDP growth set for 4-5% range
PETALING JAYA: With the national economy expanding at 4.4% in the first quarter of the year and amid uncertainties surrounding the US-China trade tension, experts expect the country's GDP growth for 2025 to be within the 4.0%-5.0% range.
Sunway University economics professor Dr Yeah Kim Leng said the first quarter GDP was lower than last year's 5.1% due to stronger global challenges resulting from the shocks to global supply and demand.
This was caused by the continuing uncertainties over US President Donald Trump's tariff policies despite a truce with China.
He said the GDP growth for the second quarter was expected to be at about 4.6%, driven by rising exports, sustained domestic consumption and investment spending.
'Exports to the United States picked up by 36.5% in the first quarter compared with the same quarter last year.
'Front-loading ahead of the end of the 90-day pause of 24% reciprocal tariff imposed on imports from Malaysia into the United States is expected to underpin Malaysia's exports which grew by 4.4% in the first quarter.
'The gradual resumption of US-China trade following the 90-day truce achieved on May 12 is also expected to lift Malaysia's exports through trade linkages.'
On Friday, the Finance Ministry said the GDP forecast of 4.5%-5.5% would be revised after US reciprocal tariffs stabilise and the situation becomes clearer.
It also acknowledged the presence of downside risks in the form of global demand, heightened geopolitical tensions and the rising prevalence of protectionist trade policies.
Yeah said the lessened fear of a US recession and a milder Chinese economic decline further boosted the growth outlook for the world's top two economies.
'This in turn has improved Malaysia's growth prospects given its high exposure to both economies amounting to a quarter of its total exports.
'Moody's downgrade of US sovereign rating is expected to trigger a shift away from US debt securities and assets.
'It signals higher credit risk and the accompanying lower demand for US dollar assets will likewise result in a weaker dollar,' he said.
On May 16, credit rating agency Moody's downgraded the United States' sovereign credit rating from its top-tier 'Aaa' to 'Aa1', on the back of rising debt burdens and higher interest costs, which would affect the country's standing as a pre-eminent destination for global capital.
Economist Geoffrey Williams said although the 4.4% in Q12025 was lower than 4Q 2024 due to domestic production disruptions rather than global headwinds, it was a strong performance given the uncertainties.
'There was a stronger-than-expected 6.8% annual rise in exports in March, when shipments to the United States rose by 50.8% to a record RM22.66bil (US$5.14bil).
'The front-loading from the effect of US tariffs has helped to push Malaysia's growth, showing a benefit from the reciprocal tariff process announced on Liberation Day on April 2.
'The tariff issue is under negotiation and we expect them to be resolved following the example of the UK and China,' said Williams.
'This will mean that the outlook for the second half of the year will be better if there is a good negotiation outcome.'
On the domestic front, Williams said there was no better time to pursue the RON95 subsidy rationalisation, adding that this would benefit in terms of long term growth.
'A commitment to this will support confidence in the government's commitment to reform.
'There may be some front-loading effect into 2Q but we would expect net exports to be lower later in the year because production and exports have been pushed forward into the last two quarters.
'We are likely to see growth within the underlying potential of the economy between 4.0% and 5.0%,' he added.
