Malaysia’s economy beats forecasts with 5.2% growth in 2025, fastest pace in 3 years

KUALA LUMPUR – Malaysia’s economy expanded at its fastest pace in three years in 2025, surpassing expectations as strong domestic demand, exports and investment propelled growth, with momentum likely to continue in 2026, the central bank said on Feb 13.

Full-year 2025 economic growth reached 5.2 per cent, a notch above the 5.1 per cent expansion in 2024 and exceeding official projections of between 4 per cent and 4.8 per cent growth.

It is Malaysia’s highest growth rate since the 9 per cent achieved in 2022, government and central bank data showed.

The economy expanded 6.3 per cent in the fourth quarter of 2025 compared with a year earlier, its fastest pace in 12 quarters, also exceeding expectations. Third-quarter growth was revised upwards to 5.4 per cent from 5.2 per cent.

Economists surveyed by Reuters and advance estimates released by Malaysia’s government had forecast that year-on-year growth would come in at 5.7 per cent in the October to December period.

On a quarter-on-quarter seasonally-adjusted basis, the economy grew 0.8 per cent from October to December of 2025, compared with 2.7 per cent in the preceding three months.

Growth momentum to continue

The central bank said household spending will benefit from employment, wage growth and government policies in 2026, while investment activity and exports will remain robust.

“This growth momentum is expected to continue in 2026, supported by resilient domestic demand and exports,” Bank Negara Malaysia governor Abdul Rasheed Ghaffour said in a statement.

Malaysia’s government and central bank expect the economy to grow between 4 per cent and 4.5 per cent in 2026, amid persisting uncertainties about the impact of US tariffs. Malaysia faces a 19 per cent tariff on goods exported to the US.

In a Reuters poll, Malaysia’s economy is projected to grow 4.5 per cent in 2026, at the upper end of the government’s forecast range. Meanwhile, its central bank is also expected to keep its benchmark interest rate on hold in 2026, with some economists expecting the next possible move to be a hike, not a cut. Malaysia could raise its economic growth outlook for 2026, its second finance minister said earlier in February, following a string of recent positive signals.

Ringgit

Headline and core inflation averaged 1.4 per cent and 2 per cent, respectively, in 2025, the central bank said, adding that the rate is expected to remain moderate in 2026.

The central bank said while the ringgit will continue to be influenced by external factors, resilient domestic fundamentals and its efforts to encourage market flows are expected to provide support for the currency.

The ringgit has gained about 17 per cent since the start of 2024, making it the best-performing Asian currency over the period. It is currently trading at its strongest levels in eight years against the US dollar. REUTERS