“If [the reciprocal tariff rates do become status quo], the forecast would be significantly revised downward.” – Moody's director and head of Asia-Pacific Economics Katrina Ell.
KUALA LUMPUR (April 14): Moody’s Analytics has lowered its forecast for Malaysia’s 2025 gross domestic product (GDP) growth to 4.4% from 5%, citing mounting global trade uncertainty triggered by the US' evolving tariff policy under President Donald Trump.
“The forecast is based on the assumption that reciprocal tariff rates do not become the prolonged status quo. If they do, the forecast would be significantly revised downward,” said Moody's director and head of Asia-Pacific Economics Katrina Ell.
Moody’s also revised Malaysia’s headline inflation forecast down to 1.6% from 2%, reflecting anticipated weaker global demand resulting from the policy shifts initiated by the Trump administration.
“The tariff landscape right now is incredibly volatile. The number of threats and pauses that have been proposed over the past two weeks is wild, and they have really significant implications for how manufacturers are going to operate,” Ell told reporters at the Bursa Malaysia–ECKL–CIMB Roundtable on “Global Headwinds vs Domestic Resilience: Refreshed Outlook 2025.”
This uncertainty presents a significant challenge for export-dependent economies like Malaysia, she said, while predicting, “we’re going to see weaker export performance this year”.
During the Asean Investment Conference 2025 last week, Bank Negara Malaysia (BNM) governor Datuk Seri Abdul Rasheed Ghaffour indicated that the central bank is not in a rush to revise its 2025 GDP growth forecast of 4.5% to 5.5%. He explained that the initial projection had already factored in potential tariff impacts under the new US administration.
However, Abdul Rasheed acknowledged that the forecast range is currently under review, given that the 24% reciprocal tariff that the US slapped on Malaysian exports to the US on April 9 — which is now on pause for 90 days — was higher than anticipated. He said BNM would await clearer information on tariff developments before making any adjustments.
The US announced the 90-day pause on the reciprocal tariff within hours after it kicked off on April 9, saying tariffed countries that had not retaliated against the US will face a 10% tariff for now.
Regarding monetary policy, Ell noted that Malaysia’s interest rates are expected to remain stable this year, while BNM retains the flexibility to act if economic conditions worsen. “Our baseline is for rates to hold steady, unlike central banks in the Philippines and Indonesia, where rate cuts are already penciled in. But BNM has the flexibility to cut rates if conditions deteriorate.”
BNM’s overnight policy rate has been maintained at 3% since May 2023.