- Slower 4Q 2024 Growth: Malaysia’s GDP is estimated to grow by 4.8% YoY in 4Q 2024, down from 5.3% in 3Q 2024.
- Robust Domestic Demand in 2025: Government initiatives like wage hikes, tourism promotion, and infrastructure projects are expected to drive GDP growth in 2025.
- Potential Challenges in 2025: Rising costs from fuel subsidy reviews, higher electricity tariffs, and global trade uncertainties could pose risks to economic growth.
Ahead of the release of the finalized fourth quarter of 2024 (4Q 2024) Malaysia’s gross domestic product (GDP) data in February, the Department of Statistics Malaysia (DoSM) has reported slower-than-anticipated economic activity in 4Q 2024.
The DoSM’s advance estimates indicate that Malaysia’s GDP rose 4.8% year-on-year (YoY) in 4Q 2024, which is lower than the GDP growth of 5.3% in 3Q 2024. With the latest quarter’s estimate, the overall GDP growth for 2024 is estimated at 5.1%, compared to 3.6% in 2023.
Malaysia’s domestic demand could remain robust in 2025 following the government’s efforts in spurring consumption and investment activities. Our house view is that GDP in 2025 could grow by 4.6% YoY.
What’s Driving Growth in 2025?
Looking ahead to 2025, several factors are expected to keep Malaysia’s economy strong:
- More Money in People’s Pockets: The government is increasing wages and providing training programs to help workers earn more. The first tranche of civil servant pay hikes and higher minimum wage commencing in February 2025 may see an increase in disposable income.
- Boosting Tourism: Malaysia is promoting tourism heavily with more advertising abroad and simplifying visa processes, as well as the government’s charter flight matching grant incentive.
- Big Infrastructure Projects: Major multi-year projects like the Penang Light Rail Transit (LRT) and the Pan Borneo Highway are continuing. The Johor-Singapore Special Economic Zone (JS-SEZ) will also reinforce domestic investment activity in 2025.
Challenges Ahead
However, there are some potential challenges:
- Rising Costs: The government plans to review fuel subsidies, increase electricity tariffs, and raise sales and services tax (SST). These changes could make things more expensive for consumers.
- Global Trade Uncertainties: External demand for Malaysian goods might be uncertain with the pro-policy stance of US President Donald Trump. However, if global supply chains shift in Malaysia’s favor, it could boost exports.
Conclusion
Malaysia’s economy is expected to remain resilient in 2025. Government initiatives aimed at increasing disposable income and boosting tourism, along with ongoing infrastructure projects, are likely to drive economic growth. While rising costs and global trade uncertainties pose risks, robust domestic demand should help offset these pressures.
Reference
CGSI Note | Malaysia Economics Update | Jan 17, 2025
Disclaimer: ProsperUs Manager of Content, Hailey Chung, does not own shares of the company.
