Malaysia cuts growth forecast on tariff volatility

KUALA LUMPUR - Malaysia’s central bank lowered its growth projection for 2025 as it contends with the fallout from US President Donald Trump’s tariffs.

Bank Negara Malaysia now sees the economy expanding within the range of 4 per cent to 4.8 per cent, lower than its previous forecast of 4.5 per cent to 5.5 per cent.

It also trimmed its inflation forecast for 2025 to 1.5 per cent to 2.3 per cent, from 2 per cent to 3.5 per cent, amid a moderation in cost and demand outlook.

“The updated growth projections account for various tariff scenarios, ranging from a continued elevation of tariffs to more favourable trade negotiation outcomes,” Bank Negara said in a statement on July 28. “This forecast remains subject to uncertainties surrounding the global economy, both on the downside and upside.”

Favourable trade negotiation outcomes, pro-growth policies in major economies, continued demand for electrical and electronic goods, and robust tourism activity could raise Malaysia’s export and growth prospects, it added.

The revised forecast comes as Malaysia seeks to lower US tariffs to less than 20 per cent, after

Mr Trump increased a threatened tariff on the South-east Asian country to 25 per cent.

The country has until Aug 1 to conclude negotiations, and is optimistic about reaching a deal.

Bank Negara said Malaysia is facing external headwinds from a position of strength, pointing to resilience in the economy based on advanced estimates in the second quarter.

Domestic demand will continue to support growth going forward, it said.

Inflationary pressure from global commodity prices is expected to remain limited, contributing to moderate domestic cost conditions, the central bank said. The impact of local policy measures is also likely to remain contained, it added. BLOOMBERG