Malaysia Q1 GDP Slows, 2025 Outlook Cut

Malaysia's economy grew by 4.4% year-on-year in the first quarter of 2025, the slowest pace in a year, with weaker performance in manufacturing, construction, and services even before the full effect of new US tariffs. Economists have lowered Malaysia's 2025 growth forecast to 4.1%-4.3%, falling short of the government's 4.5%-5.5% target. Export frontloading and declining fixed investment loan applications reflect hesitancy amid US-China trade tensions and the threat of US tariffs up to 24% on Malaysian goods. Malaysia's deep trade connections with China expose it to risks from China's deflationary pressures and regional slowdowns. Bank Negara Malaysia has reduced its statutory reserve requirement to support liquidity, while the government is negotiating with the US to mitigate tariff impacts. Despite a temporary truce in tariffs, continued global trade disruptions and structural economic vulnerabilities challenge Malaysia’s near-term outlook.