[MALAYSIA] Malaysia's economy is showing remarkable resilience, with experts projecting a robust 4.9% GDP growth for 2025. This forecast, while slightly lower than the previous year's projection, paints a picture of a nation poised for steady economic expansion despite external pressures. Let's delve into the factors driving this growth and the challenges that lie ahead for the Malaysian economy.
Maybank Investment Bank Bhd (Maybank IB) has presented a cautiously optimistic outlook for Malaysia's economic growth and investment markets in 2025. The bank's group chief economist, Suhaimi Ilias, predicts a 4.9% growth in Malaysia's gross domestic product (GDP) for the year, a slight decrease from the 5.2% projected for 2024.
Despite this modest revision, the projected growth rate remains impressive, especially considering the global economic landscape. The growth is expected to be driven by two key factors:
- Strong domestic consumer spending
- An ongoing investment upcycle
Boosting Consumer Spending
One of the primary catalysts for economic growth in 2025 is expected to be increased consumer spending. This boost is attributed to several factors:
Revision in civil salaries: The government's decision to revise civil service salaries is expected to inject more disposable income into the economy.
Minimum wage hike: From February 2025, the minimum wage will be increased to RM1,700, further enhancing employee compensation and potentially stimulating spending.
These measures are designed to put more money in the pockets of Malaysian workers, which is likely to translate into increased consumer spending across various sectors of the economy.
Investment Upcycle: A Key Growth Driver
Perhaps even more significant than consumer spending is the projected increase in both approved and realized investments. Suhaimi Ilias notes, "We are seeing a surge in the import of capital goods and based on the loan statistics from banks, we see this, coupled with a growth in banking system loans for the construction of industrial buildings and factories, as well as for the purchases of land".
This investment upcycle is evidenced by impressive statistics:
Approved private investments in Malaysia for the nine months ended Sept 30, 2024 (9M24), rose 10.9% to RM255 billion compared to the same period in the previous year.
Actual private investments for 9M24 surged 13.6% to RM242 billion compared to 9M23.
These figures indicate a strong appetite for investment in Malaysia, both from domestic and foreign sources.
Key Themes Driving Investment
The investment landscape in Malaysia is being shaped by several key themes:
National Energy Transition Roadmap (NETR): This initiative implies a total investment of RM1.2 trillion to RM1.3 trillion from 2023 to 2050, with Sarawak positioned as a renewable energy and green technology hub.
Digitalisation: The National Semiconductor Strategy aims for RM500 billion in investment in front-end and high value-added semiconductors within the next five to 10 years. Additionally, RM256 billion in digital investment, including data centers and cloud infrastructure, has been approved since 2021 up to October 2024.
Johor-Singapore Special Economic Zone (JS-SEZ): The Iskandar Regional Development Authority is targeting RM223 billion in investments to the JS-SEZ between 2024 and 2030.
Infrastructure Projects: Major projects such as the Penang Light Rail Transit system and the Johor Baru-Singapore Rapid Transit System are expected to support economic growth and attract further investment.
Stock Market Outlook
The Malaysian stock market is also expected to perform well in 2025, despite potential volatility. Maybank IB equity research co-head Lim Sue Lin predicts the FBM KLCI to touch 1,740 by the end of 2025. However, investors should brace for a potentially volatile year, particularly with the return of Donald Trump to the White House.
Key sectors to watch in the Malaysian equity market include:
- Banking industry (Maybank IB's key "overweight" sector)
- Consumer sector
- Defensive healthcare sector
Notably, foreign participation in Malaysian equity trades has been on the rise, increasing from 27% in 2022 to 36% in 2024. This trend indicates growing international interest in Malaysian stocks, although geopolitical concerns, particularly related to the U.S. presidential election, may cause some fluctuations.
Challenges and Opportunities
While the outlook for Malaysia's economy is generally positive, there are several challenges and opportunities to consider:
Challenges:
External Pressures: The Malaysian economy and stock market are likely to be influenced by global economic factors and geopolitical events.
Currency Pressure: The ringgit is expected to face continued pressure in 2025, in line with other emerging market currencies.
U.S. Policy Impact: Potential changes in U.S. tariff and tax policies under a Trump administration could create inflationary pressures and impact emerging markets, including Malaysia.
Opportunities:
Trade Diversion: Despite external challenges, there are opportunities for trade diversion within the Malaysian market.
Non-Trade Growth Engines: Sectors such as tourism and data centers are showing strong growth potential.
Political Stability: Malaysia's current political stability is likely to attract foreign investors and lead to greater foreign investments.
Ringgit Outlook
The Malaysian ringgit is expected to face some challenges in 2025. Maybank IB's head of foreign-exchange research, Saktiandi Supaat, projects the following ringgit outlook by quarters:
1Q25: RM4.60 to the dollar
2Q25: RM4.70 to the dollar
3Q25: RM4.55 to the dollar
4Q25: RM4.45 to the dollar
By the end of 2025, the ringgit is expected to trade at RM3.31 against the Singapore dollar.
Despite these challenges, there are factors that could provide support to the ringgit:
- Bank Negara is expected to maintain its overnight policy rate at 3%
- The government's progress on fiscal consolidation
- Malaysia's political stability
As we look ahead to 2025, Malaysia's economic outlook appears resilient in the face of global challenges. The projected 4.9% GDP growth, driven by strong domestic consumer spending and a robust investment upcycle, demonstrates the country's economic strength. Key sectors such as renewable energy, digitalisation, and infrastructure development are poised to play crucial roles in driving this growth.
However, it's important to note that external factors, including global economic conditions and geopolitical events, will continue to influence Malaysia's economic performance. The ability to navigate these challenges while capitalizing on emerging opportunities will be crucial for sustaining and potentially exceeding the projected growth rate.
As Malaysia continues to attract both domestic and foreign investments, maintain political stability, and focus on key growth sectors, the country appears well-positioned to achieve its economic goals in 2025 and beyond.
WhatsApp
Instagram
Threads
