KUALA LUMPUR: Bank Negara Malaysia has maintained its 2025 gross domestic product (GDP) growth projection at between 4% and 4.8%, factoring in the latest developments from ongoing tariff negotiations.
Governor Datuk Seri Abdul Rasheed Ghaffour said the central bank’s July revision had been based on tariffs ranging from 25% to 30%. However, since Aug 1, Malaysian exports to the United States have faced a lower rate of 19%.
“There is no need to revise our growth forecast. The completion of negotiations reduces uncertainty for growth prospects,” he told reporters after announcing the second-quarter GDP figures today.
He noted, however, that some uncertainties persist — particularly regarding sector-specific tariffs and ongoing discussions with certain countries that have yet to conclude.
Bank Negara had initially projected a GDP growth range of 4.5% to 5.5% in March but narrowed its estimate in July due to a more challenging global environment.
Abdul Rasheed said the tariff reduction offers greater clarity, but the high-tariff environment continues to weigh on Malaysia’s open economy.
“The impact of tariffs will be partially offset by sustained demand for electrical and electronics (E&E) products, strong tourism performance, and resilient domestic demand,” he said, adding that both upside and downside risks remain.
Potential downside risks include a sharper slowdown in trade from higher tariffs, weaker business and consumer sentiment dampening spending and investment, and lower commodity production. Upside risks could stem from more favourable trade outcomes, pro-growth measures in major economies, and stronger tourism.
In the first half of 2025, exports were bolstered by frontloading shipments to the US ahead of tariff changes, but this tapered towards the end of the second quarter. Export growth is expected to slow in the second half as tariffs take hold.
“Even so, demand for E&E goods — supported by resilient markets and emerging opportunities in artificial intelligence (AI) — will provide some cushion. Tourism will also help, with improved flight connectivity, extended visa-free travel policies, and promotional efforts ahead of Visit Malaysia Year 2026 expected to drive arrivals and spending,” he said.
Domestically, Abdul Rasheed said consumer spending remains the key growth driver, underpinned by a strong labour market, steady wage growth, healthy household finances, targeted cash assistance, and income-supportive policies.
He also emphasised that banks are well-positioned to support economic activity, with strong capital and liquidity buffers, stable loan quality, and minimal newly restructured or rescheduled loans.
For small and medium enterprises (SMEs), financing grew by 6.9% in the second quarter versus 9.8% in the first quarter, with steady demand and approvals for working capital and investment.
“Banks and development financial institutions continue to extend financing to SMEs, particularly in services, construction, and manufacturing,” he added.
