Malaysia posts 5.2% GDP growth in Q3, on track for upper-end target
Economic expansion is underpinned by sustained domestic demand and stronger net exports, says the country’s chief statistician
[KUALA LUMPUR] Malaysia’s economy expanded by 5.2 per cent in the third quarter of 2025 from the year before, reinforcing Bank Negara Malaysia’s view that the country is on track to achieve the upper end of its full-year growth target, despite persistent global uncertainties.
The final reading – the strongest quarterly performance this year – matches the earlier advance estimate of 5.2 per cent issued by the Department of Statistics Malaysia (DOSM).
Economists polled by Reuters and a preliminary government estimate also forecast a 5.2 per cent expansion for the July-to-September period. This follows year-on-year growth of 4.4 per cent in both the first and second quarters.
At a media briefing on Friday (Nov 14), DOSM chief statistician Mohd Uzir Mahidin said the pickup was underpinned by sustained domestic demand and stronger net exports.
Household spending was supported by firm labour-market conditions, income-related policy measures and ongoing cash-assistance programmes, while investment activity was lifted by continued capital expansion across both private and public sectors.
On the external front, he cautioned that export growth would continue to face headwinds from tariffs and soft global demand.
“However, growth would be supported by continued demand for electric and electronic goods, inbound tourism and the recovery in mining-related exports,” he said.
On track to achieve high growth for 2025
For the first nine months of the year, the economy expanded by 4.7 per cent.
Bank Negara governor Abdul Rasheed Ghaffour said full-year growth remains set to reach the upper end of the central bank’s forecast range of 4 per cent to 4.8 per cent.
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“Looking ahead, global economic conditions will remain challenging, and we need to keep strengthening our economic buffers to weather any headwinds that may come our way,” he said.
He added that the outlook carries “both upside and downside risk”, though tourism recovery and higher demand for electrical and electronic products is expected to provide further support.
The central bank’s 2025 growth projection is slower than last year’s 5.1 per cent expansion, reflecting the impact of trade disruptions stemming from US tariffs.
Rate cuts?
Bank Negara held its benchmark interest rate at 2.75 per cent at its meeting last week, after cutting rates for the first time in five years in July, citing easing trade uncertainties.
On the market forecast for potential rate cuts, Abdul Rasheed said current monetary policy levels remain appropriate and supportive of the economy, but there is “still space to take action” based on the prevailing outlook for growth and inflation.
Among the sectors, services and manufacturing reported stronger year-on-year growth in Q3 than in the previous quarter.
Services, which account for more than half of Malaysia’s economic output, rose 5 per cent; manufacturing expanded 4.1 per cent.
Construction continued to register double-digit growth, rising 11.8 per cent. The mining and quarrying sector rebounded sharply, posting 9.7 per cent growth after having contracted 5.2 per cent in the previous quarter; this came from increased crude-oil and natural-gas output following scheduled maintenance work.
Inflation remains stable
Headline inflation remained stable at 1.3 per cent in Q3, while core inflation rose to 2 per cent.
Abdul Rasheed said higher core inflation added some impetus to headline prices, but this was offset by declines in selected administered items.
He expects inflation to remain moderate in 2025, with headline inflation projected to average between 1.5 per cent and 2.3 per cent.
Inflation is projected to remain moderate heading into 2026, backed by stable labour-market conditions and favourable supply dynamics, he added.
Ringgit strengthening
Malaysia’s currency was broadly stable in Q3, having appreciated around 0.1 per cent against the US dollar as at end-September. On a nominal effective exchange-rate basis, the ringgit strengthened 0.8 per cent.
As at noon on Friday, the ringgit was trading at 4.1321 to the US dollar, nearly 8 per cent stronger than 4.4715 at the start of the year. Against the Singapore dollar, it appreciated almost 3 per cent to 3.1789 from 3.2742 on Jan 1.
Abdul Rasheed noted that ringgit movements were driven by external and domestic factors, citing the US Federal Reserve's rate cuts and the positive sentiment created by US-Malaysia trade agreements easing tariff uncertainties.
Analysts revise projections
Following the stronger economic performance, analysts revised their forecasts for Malaysia’s full-year GDP growth.
RHB now expects expansion of 4.7 per cent, compared with 4.2 per cent previously, while CIMB raised its projection to 4.5 per cent from 4.3 per cent.
CIMB’s regional head of treasury and markets research Michelle Chia said growth should remain firm in early 2026, supported by festive spending and the mid-February RM100 (S$32) cash handout. These would help to keep private consumption resilient.
However, weaker external demand is expected as activity with major trading partners slows. This has prompted CIMB to forecast the overnight policy rate will stay at 2.75 per cent until the end of Q1 2026, before the central bank cuts it by 25 basis points in Q2.
RHB senior economist Chin Yee Sian also warned of risks from US tariff developments, regional trade dynamics and potential sector-specific levies, especially on semiconductors.
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