Malaysia’s economy could outpace the government’s growth projections as momentum from a solid third quarter extends into year end, said HSBC.
Gross domestic product could expand 5% for the whole of 2025 on the back of reduced trade uncertainties and domestic resilience, allowing the Bank Negara Malaysia (BNM) to stand pat at a time of subdued inflation pressure, according to HSBC’s forecasts.
“We maintain our long-held view that BNM is likely to keep its policy rate steady at 2.75%,” HSBC said in a note. “After all, there is no rush, as Malaysia is likely to see better growth prospects.”
The official forecast calls for growth of 4.0%-4.8%. BNM said on Friday (Nov 14) the economy is on track to hit the upper end of the range following data showing growth accelerating to 5.2% in the third quarter thanks to robust household spending and tourism activities that boosted domestic demand.
The benchmark interest rate was kept unchanged at BNM’s final monetary policy review for the year, ahead of the data release, drawing comfort from positive macroeconomic indicators.
On a seasonally adjusted basis, the economy expanded 2.2% quarter-on-quarter, the fastest in three years. “This could be attributed to frontloading trade activities, but we think it’s actually more broad-based growth — a trend also observed in Vietnam and Singapore,” HSBC noted.
If HSBC’s growth forecast pans out, Malaysia will be the fastest growing Asean economy in 2025 after Vietnam and on par with Indonesia.
While the recently signed US-Malaysia agreement reduces trade uncertainty, the biggest downside risk to trade is the fate of the tariffs on the electronics sector, the bank flagged. About 60% of Malaysia’s exports to the US are electronics, half of which are semiconductors.
“There are also good reasons to believe in the sustained momentum” in private consumption, with lower petrol prices beginning September translating into an additional annual saving of RM3.6 billion or 0.2% of gross domestic product for Malaysian consumers, HSBC said.
Further, booming tourism is also providing a tailwind for the country's retail sector, and with next year’s Visit Malaysia 2026 campaign, “the boost in the sector is likely to be even bigger”, the bank added.
Source: theedgemalaysia