Malaysia’s economy slows in Q1, outlook hit by trade tensions

KUALA LUMPUR – Malaysia’s economy grew 4.4 per cent in the first quarter of 2025 from a year earlier, slower than the previous quarter, with the central bank projecting a weaker outlook due to trade tensions affecting spending and investment activities.

Growth in the January to March period was in line with government estimates, but below the 4.5 per cent expansion forecast by economists surveyed by Reuters. The economy grew a revised 4.9 per cent in the final quarter of 2024.

The central bank said first quarter economic growth was driven by sustained household spending growth amid positive labour market conditions and policy support, as well as steady expansion in investments, and continued export growth.

“Growth was affected by lower oil and gas production, and normalisation in motor vehicle sales and production,” Bank Negara Malaysia governor Abdul Rasheed Ghaffour said at a press conference. On a quarter-on-quarter seasonally adjusted basis, first quarter gross domestic product expanded 0.7 per cent versus a 0.2 per cent contraction in the previous quarter.

2025’s growth is expected to be slightly lower than the 4.5 per cent to 5.5 per cent forecast range, said Mr Abdul Rasheed, adding that a new estimate would be announced in the next month or two.

“The balance of risk to the growth outlook is currently tilted to the downside,” he said, adding that slower growth in major trading partners due to trade restrictions would affect spending and investment activities in Malaysia.

Malaysian Prime Minister Anwar Ibrahim said earlier in May that the suspension of most of the US tariffs until July meant the economic impact was manageable for now, but Malaysia was unlikely to meet its growth forecast in 2025.

Malaysia is facing a 24 per cent tariff rate on its exports to the US from July, unless it is able to negotiate a reduction of the levy. REUTERS