BMI: Malaysia’s 2025 growth forecast revised up to 4.6pc, maintained at 4.1pc for next year

KUALA LUMPUR, Nov 18 — Malaysia’s economic growth is set to be stronger than previously expected this year, driven largely by domestic consumption, according to the latest outlook from BMI Research, a unit of Fitch Solutions.

Data released on November 14 showed Malaysia’s economy expanded 5.2 per cent year-on-year (y-o-y) in the third quarter of 2025, up from 4.4 per cent in Q2.

BMI noted that this likely marks the peak of growth for the year, but forecast a more modest slowdown in the final quarter.

As a result, BMI has revised Malaysia’s 2025 growth forecast upward to 4.6 per cent, from its earlier projection of 4.2 per cent.

Growth in 2026 is maintained at 4.1 per cent, reflecting a stronger base for comparison this year.

Private consumption drives growth

Private consumption was the main contributor to headline growth in Q3 2025, accounting for 3.1 percentage points, BMI said.

Government initiatives, including a one-time cash handout programme, helped sustain domestic activity, while Malaysia’s tight labour market further supported spending.

The unemployment rate held at a 10-year low of 3.0 per cent for the fifth consecutive month in September.

Looking ahead, BMI expects Budget 2026 to provide a fiscal buffer to maintain domestic activity.

The second phase of the Public Service Remuneration System, set to begin in January 2026, is also expected to spur household consumption.

Investment and exports face headwinds

Investment spending, which surged in Q2 2025, is now expected to slow. BMI said global uncertainties, particularly surrounding US tariff policies, are likely to temper direct investment flows, especially in capital-intensive sectors such as data centres.

Exports, a key driver of growth in recent quarters, are also expected to moderate. While Malaysian exports to the US, particularly electrical and electronic products, rose from 13.5 per cent y-o-y in Q2 to 17.5 per cent in Q3 2025 as firms sought to front-run tariffs, this momentum is unlikely to continue.

BMI highlighted that potential US tariffs on semiconductor imports from companies without US-based manufacturing could significantly affect Malaysia, given that semiconductors made up nearly 20 per cent of shipments to the US in 2024.

Domestic demand remains key

Overall, BMI sees domestic demand as the main growth driver, supported by government measures and strong labour market conditions, while investment and export growth face near-term challenges from external uncertainties.