KUALA LUMPUR (Jan 7): HSBC Global Research has raised its 2025 economic growth projection for Malaysia, citing robust consumption and investment despite external risks. 

HSBC now projects Malaysia’s gross domestic product (GDP) to grow 4.8% in 2025 (from 4.6%), after raising its GDP forecast for 2024 to 5.2% (from 5%).

“Despite external risks, consumption and investment can, fortunately, partially support growth,” added HSBC in its 2025 Asia Economics Outlook report on Tuesday.

Additionally, the research firm said the country’s gross fixed capital formation (GFCF) has shown impressive double-digit growth for three consecutive quarters, driven by both public and private sectors.  
 
In its report, HSBC highlighted Malaysia’s strong recovery in 2024, particularly in the manufacturing sector, where electrical & electronics (E&E) exports have rebounded.

“Compared to peers, there is still room for Malaysia’s trade sector to improve, although that’s not the case for the commodity side. Palm oil continues to register double-digit growth, but oil and LNG (liquified natural gas) exports remain drags on exports.”

It noted that while US trade policies under President-elect Donald Trump pose risks, especially for Malaysia’s semiconductor sector, strong consumption and investment continue to support growth.

On inflation, HSBC noted that the trajectory will largely depend on the extent of any subsidy removals.

As the market awaits details on the subsidy rationalisation for the widely used RON95 fuel — expected to begin mid-year — particularly concerning the scope of implementation and mitigation efforts, HSBC said this “leaves a degree of uncertainty for 2025”.

Nevertheless, HSBC forecasts that inflation will likely fall below Bank Negara Malaysia’s target range of 2% to 3.5%, with the overnight policy rate expected to remain unchanged at 3%.

“Given recent downside surprises, we have revised our headline inflation forecast down to 1.9% (from 2.3%) for 2024, and to 2.7% (from 3%) for 2025, although we acknowledge uncertainty from the potential subsidy rationalisation on RON95.”