Malaysia’s Q1 growth expected to come in below expectations at 4.4% as US tariffs cast shadow over outlook

[KUALA LUMPUR] Malaysia’s economy is expected to expand by 4.4 per cent year on year (yoy) in the first quarter of 2025, moderating from the 5 per cent expansion recorded in the preceding quarter.

Official data released on Friday (Apr 18) indicated that robust domestic activity helped to cushion the impact of ongoing global headwinds.

The advance estimate from the Department of Statistics Malaysia (DOSM) suggests continued underlying momentum, supported by resilient consumer demand and a healthy labour market. However, it is below the 4.8 per cent median estimate in a Bloomberg News survey, and marks a third straight quarter of slower growth.

The final gross domestic product figures are scheduled for release on May 16.

DOSM chief statistician Mohd Uzir Mahidin said Malaysia’s economic growth remained intact amid global uncertainties, mainly supported by domestic consumption, underpinned by resilient growth in retail and wholesale trade as well as a stable job market.

According to official projections, the services sector remained the main driver of quarterly economic growth, expanding 5.2 per cent.

Manufacturing grew 4.2 per cent, supported by strong output in electrical, electronic and optical products, as well as vegetable oils, animal fats and food processing.

Construction posted double-digit growth of 14.5 per cent, while agriculture edged up 0.7 per cent. Meanwhile, the mining and quarrying sector contracted 4.9 per cent due to lower output across its sub-sectors.

Amid global trade uncertainties, policymakers are reviewing the official 2025 growth forecast for Malaysia – currently set at 4.5 to 5.5 per cent – against the backdrop of disappointing economic data.

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Malaysia was previously subjected to a 24 per cent US import tariff before a temporary reduction to 10 per cent for 90 days, occurring alongside increased tariffs on Chinese imports.

To mitigate the adverse economic impact of US tariffs on its exports, the country is actively engaging with the US to negotiate reduced rates and secure a broader range of exemptions, said Investment, Trade and Industry Minister Tengku Zafrul Aziz on Monday. In line with its regional counterparts, Malaysia has committed to not imposing retaliatory levies.

Exports up ahead of US tariffs

Trade data released alongside the GDP estimates showed exports rose 6.8 per cent yoy to RM137.3 billion (S$40.9 billion) in March, outpacing expectations.

The final figures exceeded the 2.6 per cent median forecast in a Bloomberg survey and outpaced February’s 6.2 per cent gain.

“Moving forward, there is a need for caution, given the uncertainties of global demand, which may temper growth in investments and domestic demand,” the ministry said, warning that Malaysia remains highly exposed to external risks.

Shipments to US surge nearly 51%

Shipments to the US surged 50.8 per cent to nearly RM22.7 billion, ahead of planned US import tariffs.

Exports to China – Malaysia’s largest trading partner – declined 1.3 per cent, but those to the Hong Kong and Taiwan markets were up around 26 per cent and 31 per cent, respectively.

Gross imports fell 2.8 per cent in March from a year earlier, missing expectations for a 1.4 per cent increase and reversing a 5.5 per cent gain in February.

Imports of intermediate goods – semi-processed materials used in manufacturing – slipped 0.6 per cent due to lower purchases of primary fuel and lubricants.

Capital goods imports plunged 19.2 per cent, weighed down by a sharp drop in non-transport equipment. In contrast, imports of consumption goods rose 3.6 per cent, driven by stronger demand for durable items.

Malaysia’s trade surplus widened to RM24.7 billion in March – the highest since June 2023 – nearly doubling both yoy and month on month.