Malaysia’s Economic Growth to Slow in 2025 Amid Global Uncertainties, ICAEW Reports. Malaysia’s economy is expected to grow at a slower pace in 2025 as external challenges weigh on the country’s trade-dependent sectors, according to the latest ICAEW Southeast Asia Economic Insight: Q2 2025 report. The nation’s GDP growth is projected to moderate to 4.3% in 2025, down from 5.1% in 2024. The slowdown reflects the impact of escalating global trade tensions, softer demand from major export destinations like the United States and China, and overall subdued external sentiment.
Despite a temporary export boost early in the year—particularly in April 2025, when goods exports surged by 26% year-on-year due to front-loaded shipments ahead of U.S. tariff hikes—the uplift is expected to be short-lived. Export growth had already slowed sharply in Q1 2025 to just 1.6% year-on-year, well below the 7.1% average of the preceding three quarters. Malaysia’s heavy reliance on external markets, especially the U.S., which accounts for more than 4% of GDP and around 11% of gross exports, continues to expose the economy to volatility. The imposition of a 10% U.S. tariff on Malaysian imports, while less severe than the initially proposed 24%, still poses a considerable downside risk.
China’s weakening demand adds further pressure, as it remains Malaysia’s largest export destination. However, one of the country’s saving graces has been its resilient electrical and electronics (E&E) sector. Global demand for semiconductors and related components—key segments in which Malaysia plays a vital role—has helped E&E exports grow by approximately 20% year-to-date. This sector remains critical to sustaining export performance amid global headwinds.
Tourism also continues to support economic activity. Visitors from ASEAN nations, who made up 67% of all tourist arrivals in 2024, are helping to stabilize the sector. In Q1 2025, tourism-related service exports grew by 17% year-on-year. Nonetheless, the outlook for further growth may be tempered by income and employment uncertainties in key source countries.
With limited room for fiscal expansion due to elevated public debt, monetary policy is expected to take the lead in supporting domestic demand. Inflation remains modest at around 1.5%, creating the conditions for Bank Negara Malaysia (BNM) to potentially cut interest rates by 50 basis points later this year. The central bank has already indicated an accommodative stance aimed at mitigating the effects of sluggish domestic investment and consumer spending.
Speaking at the ASEAN Investment Conference 2025 in Kuala Lumpur, Dato’ Mohammad Faiz Azmi, Executive Chairman of the Securities Commission Malaysia and an ICAEW Council Member, emphasized the importance of ASEAN collaboration. He noted that the region’s collective strength lies in its unity and shared goals, urging deeper regional investment and cooperation to cushion against global volatility.
ICAEW also pointed to a clear trend of deceleration in Malaysia’s key economic indicators between March 2022 and March 2025, including GDP growth, private consumption, and exports. Nevertheless, the report concludes that Malaysia’s economy remains on a stable course, underpinned by robust sectors and responsive policymaking.
