KUALA LUMPUR (Nov 14): Economists have turned bullish on Malaysia’s economic outlook for 2025, expecting it to hit the upper end of the government's official 4%–4.8% forecast range, following strong growth numbers in the third quarter of this year.

Overall, economists expected that the gross domestic product (GDP) growth will continue to be supported by resilient domestic expansion, improved tariff clarity and a stronger mining and manufacturing pipeline, overall economists said in separate notes on Friday. 

"Despite slower growth in domestic demand and exports, Malaysia’s growth profile remains one of the most balanced in the region," ANZ Research economists said in its assessment report. 

It added that the country’s growth will be supported by steady labour market conditions and sustained investment approvals even as external demand moderates.

On Friday, the Bank Negara Malaysia announced Malaysia’s 3Q2025 GDP expanded 5.2% year-on-year (y-o-y), matching the median forecast of a Bloomberg poll and was higher than the 4.4% y-o-y growth in the second quarter. On a seasonally adjusted basis, GDP grew 2.4% quarter-on-quarter.

At least three research houses — RHB Research, MBSB Research and CIMB Treasury & Markets Research — have raised their 2025 growth projections. The economists said that the strong economic growth in 3Q coupled with more benign tariff impacts and resilient domestic conditions, reinforces expectations for a firmer 2025, while noting that that growth momentum is expected to strengthen further in 2026.

“We revise our GDP growth forecast for 2025 higher to 4.6% (previous: 4.3%), taking into account the strong growth in 3QCY2025 and less significant impact of tighter US trade rules on external trade and production activities,” MBSB said.

The house highlighted that Malaysia continues to benefit from the global tech upcycle, supporting manufacturing and E&E segments, though it warned that external uncertainties — including shifting trade rules, renewed tariff pressures and geopolitical risks — may weigh on 2026’s trade outlook.

This comes despite the central bank’s comment that the export market is expected to be impacted by tariffs and more moderate external demand. However, export growth is likely to be supported by continued demand for electronics, inbound tourism and a recovery in mining-related exports.

Separately, RHB Research also revised its 2025 forecast to 4.7% (from 4.2%), pointing to stronger mining output, robust manufacturing performance and upside from higher net exports. The view comes on the back of easing tariff risks and “continued resilience in E&E exports”, while projecting the manufacturing sector to expand 4.1% in 2025 versus its earlier 3.8% estimate.

As among the few research houses that retain its projection, Kenanga noted that "external risk persists given Malaysia’s trade exposure" particularly export-oriented manufacturing. Kenanga warned that while tariff tensions have eased, US tariffs remain high and global supply chain adjustments could weigh on exports.

"We expect tariff effects to emerge toward year end and into 2026 as costs pass through to American consumers and supply chains adjust. Even so, the Malaysia-US Agreement on Reciprocal Trade (ART) should help preserve competitiveness and limit export disruption," Kenanga said.  

Across the board, economists forecast that 2026 growth will remain firm at around 4.2%–4.7%, supported by domestic demand, fiscal support and pipeline investments offsetting weaker external demand.