KUALA LUMPUR (April 17): The Socio-Economic Research Centre (SERC) has revised its GDP growth forecast for Malaysia to 4%, from 5%, in response to rising uncertainty surrounding US tariff policies.

"Following the announcement of the reciprocal tariff by [US President Donald] Trump, we immediately revised our GDP forecast down from 5% to 4% as an initial adjustment," said SERC executive director Lee Heng Guie.

The projection remains subject to the outcome of negotiations during the 90-day pause, potential additional US trade restrictions, and possible retaliatory actions by impacted countries, Lee said  during a media briefing on Malaysia’s Quarterly Economy Tracker (January-March 2025) and the 2025 outlook.

This comes below Bank Negara Malaysia's forecasted GDP of 4.5% to 5.5% in 2025. In 2024, Malaysia recorded a GDP growth of 5.1%.

SERC projects exports of goods and services to grow by 3% in 2025, significantly lower than 8.5% in 2024, citing concerns over the impact of tariffs on electrical and electronics (E&E) products — the country’s largest export segment, which accounts for 54.6% of RM198.6 billion of total export value that exports to the US.

US consumers will likely continue to perceive imported goods as expensive and may prioritise their spending, which could lead to weaker demand, Lee said.

The tariff risk could also disrupt tech sector supply chains, Lee said. Exports of E&E products remain at risk despite the current exemption of semiconductor products by the US, he said.

Similarly SERC sees private consumption growth at 4.4% in 2025 from 5.1% in 2024, citing the impact of income effects.

"If export [growth] declines significantly, it will have a spillover effect on domestic demand" as income, employment and subsequently consumption could be negatively affected, Lee added.

As of February this year, Malaysia's unemployment rate stood at 3.1%. The Malaysian Employers Federation (MEF) sees wages growing by about 5% this year. SERC does not provide projections on both metrics but Lee noted that SERC remains cautious on potential rise of unemployment moving forward.

Additionally, the research house has projected an inflation rate of between 2.5% and 3%, driven by several factors including the absence of retaliatory tariffs on US imports into Malaysia, the scheduled subsidy rationalisation for RON95 fuel in mid-2025, the mandatory Employees Provident Fund (EPF) contributions for non-citizen workers starting in the fourth quarter of 2025, potential implementation of the multi-tiered foreign worker levy, and a possible electricity tariff hike in the second half of 2025.

Regarding the local currency, Lee said the ringgit is expected to remain stable within the range of 4.5 to 4.6 against the US dollar this year. However, he noted that this outlook is still subject to developments in the US, global, and Malaysian economies.

“As the dollar index has been declining, it reflects investor concerns about the US economy, which is likely to strengthen other currencies against the dollar,” he said. The Malaysian ringgit will be assessed within the context of a composite currency basket, which he believes remains relatively stable, he added.

He also mentioned that Bank Negara is closely monitoring the ringgit and encouraging corporations and government-linked companies (GLCs) to bring back their realised investment income. This will help alleviate downward pressure on the ringgit, alongside other factors such as deficit reduction, which will further support the local currency, Lee added.