By Danial Dzulkifly
SHAH ALAM, Jan 6 — Malaysia's economy is poised for steady growth in 2025, with gross domestic product (GDP) projected to range between 4.0 and 5.5 per cent.
This is despite looming global economic challenges, including the potential escalation of United States (US)-China trade tensions.
Economists remain cautiously optimistic, citing strong domestic demand and recovery in key sectors, while emphasising the need for preparedness against future economic headwinds.
Malaysia University of Science and Technology's Prof Emeritus Barjoyai Bardai sees the economy following its natural course post-pandemic recovery.
"Since 2021, our growth trajectory has been on the rise. For 2025, we anticipate growth within four to 4.8 per cent, possibly peaking by 2026," he said, pointing to the critical roles of manufacturing and tourism.
BIMB Securities deputy chief economist Muhammad Zafri Zulkeffeli projects a conservative 4.7 per cent growth, aligning with international forecasts.
"Domestic demand, bolstered by salary hikes for civil servants and a resilient job market, will underpin growth, with unemployment at a low 3.2 per cent," he said.
This outlook is supported by major financial institutions, with the International Monetary Fund forecasting Malaysia's growth to moderate from 5.0 per cent in 2024 to 4.7 per cent in 2025, while RAM Ratings maintains a 4.0 to 5.0 per cent projection.
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Investors monitor share market prices in Kuala Lumpur on August 25, 2015. — Picture by REUTERS[/caption]
External risks and opportunities
According to the economists, Donald Trump's imminent return to the US presidency poses significant implications for Malaysia's trade-dependent economy.
Barjoyai also pointed to Malaysia’s involvement with BRICS, albeit as a junior partner, which aligns with the nation’s goal of reducing reliance on the US dollar.
"While Malaysia's exports to the US grew by 30 per cent, the Trump administration's threat to impose a 100 per cent tariff on BRICS members poses challenges. However, such shifts may benefit Malaysia as global firms diversify supply chains away from China," Barjoyai said.
Nonetheless, both economists agree that the tourism sector will emerge as a bright spot and is poised to be among the major drivers of the economy for 2025.
Zafri highlighted remarkable recovery in the sector, with tourist arrivals projected to surpass pre-pandemic levels this year.
"Tourism is thriving, with foreign arrivals reaching 20.6 million in the first ten months of 2024, surpassing pre-pandemic levels. For 2025, arrivals are projected to hit 30 million,” he said.
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Domestic and international tourists visiting the Kuala Lumpur Tower during the Maal Hijrah holiday, on July 8, 2024. — Picture by BERNAMA[/caption]
Policy implementation and public sentiment
The Madani Economy framework has also shown early promise, Barjoyai said, pointing to the RM300 billion in investment interest.
However, he emphasised the need for wealth redistribution and the strengthening of the nation’s small-and-medium enterprise (SME).
"We must focus on SMEs, which employ 85 per cent of the workforce but contribute less than 30 per cent to the GDP. Increasing their contribution is vital to tackling wealth inequality,” Barjoyai added.
He said the minimum wage increase to RM1,700 effective February 2025 represents progress, but falls short of Bank Negara Malaysia's living wage benchmark of RM4,500.
Separately, the Federal government announced a 15 per cent salary adjustment for civil servants in the implementing, management, and professional groups, and a seven per cent increase for those in the top management group.
The adjustment follows a comprehensive salary review under the new Public Service Remuneration System. This is to come into effect this year.
Despite the increase in wages and recent improvements in government approval ratings, public perception remains mixed.
A recent survey by think tank Merdeka Centre indicated that Prime Minister Datuk Seri Anwar Ibrahim's approval rating rise to 54 per cent in December, up from 50 per cent a year ago, while the Unity Government's rating increased to 51 per cent from 46 per cent.
It said the tight spread between positive and negative outlooks is primarily driven by ongoing concerns about the cost of living and anxiety over upcoming subsidy cuts.
As in the past, voter sentiments remain centered on the economy, with 65 per cent citing it as the “number one problem facing the country today”.
Zafri attributed ongoing public concerns to wage stagnation, coupled with the rising cost of living, especially the prices of daily essential goods.
"Inflation is low at 2 to 3 per cent, and GDP growth is solid, but median wages remain below RM3,000. Food prices growing at 4 to 5 per cent further strain households." he said.
Looking ahead, both economists stressed on the importance of government communication in relaying their policies effectively and how it will impact ordinary Malaysians.
"The challenge is balancing short-term sentiment with long-term goals. Tangible progress in job creation, income growth, and cost-of-living relief is crucial." said Barjoyai.
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A view of people walking about and doing weekend shopping along Jalan Masjid India in Kuala Lumpur, on September 1, 2024. — Picture by BERNAMA[/caption]
