Revised GDP Growth Forecast Reflects Malaysia’s Economic Realities -- Economist

By Harizah Hanim Mohamed

KUALA LUMPUR, July 28 (Bernama) – The revised projection for Malaysia’s GDP growth in 2025 by Bank Negara Malaysia (BNM) is a realistic forecast that aligns with the economy’s underlying growth potential, said economist Professor Geoffrey Williams.

The central bank has revised Malaysia’s 2025 GDP growth projection to between 4.0 per cent and 4.8 per cent, down from its earlier projection of 4.5 per cent to 5.5 per cent. BNM’s projection takes into account various tariff scenarios, ranging from continued elevation of tariffs to more favourable trade negotiation outcomes.

Williams attributed the revision of the growth forecast to uncertainties surrounding the United States government’s tariffs.

“However, from a local perspective, domestic demand remains strong and is expected to benefit from a lower Overnight Policy Rate (OPR) and the one-off RM100 cash handout for all citizens aged 18 and above, which is part of Prime Minister Anwar Ibrahim’s series of economic measures.

“Although Malaysia’s total trade and exports have been strong, it is net trade that matters for growth, and this has been squeezed by front-loading and volatility due to the delayed tariff negotiations,” he told Bernama when contacted.

Williams pointed out that the downgrade in growth expectations was anticipated and widely communicated. The central forecast now stands at approximately 4.5 per cent, down from the previous forecast range of 4.5 to 5.5 per cent.

“The original forecast was optimistic even under normal circumstances, without the downside risk posed by the tariff negotiations. There are no significant concerns about growth potential, except for the direct effects of tariffs on Malaysia and major regional markets,” he added.

Asked about the impact of the revised GDP forecast on job creation, household spending, and investor confidence, Williams said he expects the unemployment rate to remain low, job creation will continue as normal, and investor confidence to stay relatively unaffected.

He added that it is essential for Malaysia to secure a favourable tariff agreement to remain competitive against other countries such as Vietnam and Indonesia amid ongoing global uncertainties and evolving trade policies.

Williams noted that the OPR cut should help keep growth within the revised forecast range, so there is no need to cut further.

Meanwhile, the Department of Statistics Malaysia (DOSM) announced Malaysia’s Producer Price Index (PPI), which measures price changes at the producer level, went down further by 4.2 per cent year-on-year (y-o-y) in June 2025, after a 3.6 per cent decline in the previous month.

It was reported that all sectors registered y-o-y declines last month, with the mining and manufacturing sectors emerging as the primary contributors to the index’s overall negative trend.

“The falling PPI is consistent with a low Consumer Price Index (CPI) and reflects price caution due to trade tensions, lower oil prices and a strong ringgit.  

“The lower PPI will likely be reflected in lower inflation for the year across all sectors. This explains the lower inflation forecast,” he said.

Williams said that while the lower CPI reflects trade tensions and tight market conditions for businesses, it benefits consumers.

“Businesses are staying competitive by moderating producer prices, so there is no need for government intervention in the market,” Williams said.

-- BERNAMA