KUALA LUMPUR (April 25): The World Bank has projected Malaysia’s economic growth to slow in 2025, citing the challenging global environment.

“With all possible caveats, we (World Bank) project Malaysia’s 2025 [GDP] growth rate at 3.9%,” World Bank lead economist for Malaysia Dr Apurva Sanghi said in a post on X on Friday.

Among Malaysia’s regional peers, the World Bank set Indonesia’s 2025 growth outlook at 4.7%, the Philippines at 5.3%, Cambodia at 4%, Thailand at 1.6%, and Vietnam at 5.8%.

In its Spring Meetings Marco Poverty Outlook published on April 23, the World Bank said the forecast is predicated on the heightened global economic policy uncertainty, particularly regarding trade policy.

The international financial institution said exports will face considerable external headwinds arising from the deterioration in the global environment.

While external challenges are likely to impact investment decisions, private investment is expected to remain supported by ongoing multi-year investments and the implementation of previously approved projects, according to the World Bank.

Nonetheless, domestic demand and private consumption supported by government measures will continue to drive growth.

However, it noted this growth outlook is subject to several significant downside risks, primarily driven by increased uncertainty around trade and investment.  

“These developments may exacerbate trade fragmentation, contribute to further uncertainty, and lead to a more pronounced deceleration in global economic growth. The impact of commodity price declines may compound the potential effects of trade uncertainty,” it said.

“Domestic risks to Malaysia’s growth stem from inflationary pressures from domestic policy measures and potential supply disruptions from unfavourable weather conditions,” it added.

The World Bank’s forecast on Malaysia’s 2025 GDP growth is even lower than the International Monetary Fund’s (IMF) recently downgraded projection.

The IMF trimmed its growth forecast for Malaysia this year to 4.1%, from its January estimate of 4.7%. The readjustment came in line with a broader reduction in regional projections following the US’ tariff barriers.

The Malaysian government is also reviewing its official growth projection of 4.5% to 5.5% for 2025, given recent developments casting uncertainty for investment and trade. Second Finance Minister Datuk Seri Amir Hamzah Azizan said the revised economic outlook is expected to be released in coming months.