KUALA LUMPUR (April 15): The ongoing trade policy uncertainty is already dampening investment, compressing margins and affecting market sentiment, said PublicInvest Research.

Malaysian government is engaging the US and other trading partners in a bid to "preserve sectoral competitiveness and secure carve-outs via its role in global value chains" but the "prolonged policy opacity" is taking its toll, said the research firm as it cut its 2025 GDP forecast to 4.2%.

Further, it added, Malaysia’s ability to adapt policies with credibility will be crucial — not just for maintaining investor trust but also for positioning the country as a stable hub in an increasingly fragmented global economy.

"While the ringgit faced depreciation pressure immediately following the tariff announcement, it has since stabilised, supported by the temporary exemptions on key exports and the 90-day enforcement pause. This has alleviated some near-term currency volatility, although broader uncertainty remains," said the house in a note on Tuesday.

It maintained their USD/MYR forecast at 4.45 to 4.55, supported by narrowing rate differentials, fiscal discipline and contained monetary policy.

The firm expects Bank Negara to maintain the overnight policy rate at 3% throughout the year, emphasising the need for preserving macroeconomic stability in the face of global trade uncertainties.

“With growth momentum expected to moderate and inflation risks largely contained under the targeted subsidy framework, there appears to be limited justification for either tightening or easing,” said the research house.

The current stance allows policymakers to be strategic while navigating a hostile trade environment without adding procyclical pressure.

PublicInvest Research cut their 2025 gross domestic product forecast down to 4.2%, previously 4.9%, due to trade disruptions and delayed investments in the manufacturing and electronics sector.

“We believe the deeper issue lies in the breakdown of forward visibility for firms operating across integrated supply chains,” said analysts.

Despite the temporary 90-day pause on US reciprocal tariffs, the lack of transparency of policies clouds the outlook in the months ahead. Malaysia’s response to the tariffs is to negotiate, not retaliate, which could further weigh heavily on investments, margins and sentiment, according to the research note.

PublicInvest Research said these uncertainties could be offset by domestic demand as household consumption is still moderate due to the implementation of minimum wage hikes. They added that ongoing initiatives such as digital infrastructure development and public-private collaboration in high-value sectors lend medium-term support to the economy.

In the research note, their consumer price index forecast remained at 2.4%, in support of the Ron95 fuel subsidy as they expect the targeted nature of the policy would keep inflation risks contained amidst price-dampening effects from weak global demand.

PublicInvest Research noted that Malaysia needs to focus on policy flexibility and credibility to maintain investor trust and stay relevant in global supply chains amidst an unstable world economy.