KUALA LUMPUR (April 22): Malaysia should brace for potential US recession and slowdown of China that will drag on the global economy this year, OCBC warned on Tuesday.
Gross domestic product (GDP) growth will likely slow to 4.3% for Malaysia this year from 5.1% in 2024, according to the bank’s latest forecast. A worst-case scenario could see growth falling to 3.5%, with more punitive US tariffs on semiconductors, Malaysia’s key exports, the bank said.
“There will be some slowdown” in the second half of this year, OCBC chief economist Selena Ling said at a briefing. “I think that's quite inevitable.”
The US is currently investigating imports of semiconductors after exempting them from the punitive reciprocal tariffs levied on goods shipped from all trading partners. The sweeping tariffs have since been frozen, and an interim headline 10% levy was imposed for 90 days.
Malaysia’s economic growth may have decelerated to 4.4% in the first quarter of 2025, backed largely by resilient domestic demand, official flash estimates showed.
To support the economy, Bank Negara Malaysia may front-load a 50-basis-point cut in the overnight policy rate as soon as this year, Ling predicted.
US recession
Ling is sceptical about countries reaching a deal with the US, and noting that the 10% minimum tariff most countries facing now “seems to be the new normal”.
Stagflation in the US, one of Malaysia’s top trading partners, is now increasingly likely amid inflationary pressure from the tariffs, Ling cautioned.
A technical recession of two consecutive quarters of GDP contraction is also possible, she said.
Globally, however, deflationary pressures are mounting due to the slowdown in global growth amid falling commodity prices, as the world’s top two economies decelerate and as excess goods from China flood the market, Ling added.