Malaysia's Economic Growth Outlook

By Pranoy Krishna

BENGALURU (Reuters) – Malaysia's economic growth likely slowed modestly in Q3 compared to the previous year, as solid private consumption and construction activity cushioned the decline in mining output, according to a Reuters poll of economists.

The median forecast from 25 economists conducted from Nov. 6-12 indicated that the Southeast Asian economy grew by 5.3% year-on-year in the July-September period, matching the initial estimate but down from 5.9% in the previous quarter.

Growth was largely driven by robust expansion in the manufacturing, construction, and agriculture sectors.

> "Malaysia will likely show resilient economic growth in Q3. The services sector likely experienced broad-based expansion, albeit at a slightly slower pace than in Q2. The manufacturing sector benefited from an ongoing global tech upcycle, particularly in the electronics segment," said Taimur Baig, chief economist at DBS Bank.

The main drag on overall GDP growth in Q3 2024 was the contraction in the mining sector. Positive growth drivers are expected to persist into 2025, with a favorable base effect in Q4 2024 likely boosting GDP recovery to 5.3% for the full year, compared to 3.6% in 2023.

A separate poll published last month projected Malaysia's growth to average 4.7% next year, within Bank Negara Malaysia's (BNM) forecast of 4.5-5.5%.

However, a slowdown in global demand, especially from China—Malaysia's major trading partner—resulted in a contraction of Malaysian exports in September, posing risks to growth prospects.

U.S. President-elect Donald Trump's plans to impose tariffs on imports from all countries are also expected to hinder Malaysia's exports.

> "There are some key headwinds on the horizon. The most prominent risk is the potential for blanket U.S. import tariffs globally. If enacted, it would significantly dampen global trade activity," stated Woon Khai Jhek, senior economist at RAM Ratings.