KUALA LUMPUR (Oct 18): In anticipation of a better economic outlook on both domestic and external fronts, Malaysia's labour market is poised to remain stable in 2025. The unemployment rate is expected to drop further to 3.1%, reaching its lowest point in a decade as the economy gains momentum and structural reforms take effect.

This improvement in labour force participation is expected to be driven by strategies aimed at addressing structural issues in the labour market, particularly concerning wages and productivity. These initiatives are expected to enhance business efficiency and boost labour demand, the Ministry of Finance (MOF) said in its 2025 Economic Outlook report.

Total employment is projected to grow by 2.1%, reaching 16.6 million people, with more than 80% of job opportunities concentrated in the services and manufacturing sectors.

For 2024, the ministry forecasted the overall unemployment rate to be around 3.2% or 534,500 unemployed individuals, while total employment is expected to grow by 3.9% to 16.2 million people.

The jobless rate has been on a downward trend over the past five years after peaking during the Covid-19 pandemic.

In 2020, the unemployment rate surged to 4.5%, representing 686,600 individuals, up from 3.3% or 508,200 individuals in the previous year. The rate increased slightly to 4.6% (707,600 people) in 2021, before easing to 3.9% (614,500 individuals) in 2022. By 2023, it further declined to 3.4%, with 553,400 people unemployed.

The report also emphasised the need to create more skilled job opportunities in the country, noting that attracting quality investment in high-tech and innovative industries is fundamental.

“Strategies will be rolled out under Budget 2025 to improve the business environment by streamlining regulatory processes and targeted incentives to drive economic growth through a more competent and adaptable workforce,” the report said.

Labour productivity, measured by value-added per worker, is projected to rise by 2.7% to RM101,700 in 2025, spearheaded by wider adoption of advanced technologies, digitalisation and modern management practices across enterprises to enhance value chains, particularly in high-growth high value (HGHV) industries.

“The ongoing implementation of upskilling initiatives such as the Academy in Industry programme reflects the government's continuous efforts to address talent supply-demand mismatches.

“Likewise, programmes such as the e-shared prosperity organisation, productivity grants and good regulatory practices, will further enhance business efficiency and productivity across sectors,” the report said. 

Click here to read more about the Economic Report 2024/2025.