The Asean+3 Macroeconomic Research Office (Amro) has downgraded its economic growth forecast for Malaysia in 2025 to 4.2%, from 4.7%, after taking into account rising global uncertainties stemming from heightened US tariffs and the subsequent impact from the broader slowdown in global demand.
Amro also lowered the country's gross domestic product (GDP) growth forecast for 2026 to 3.8%, from the 4.5% estimate in April, aligning with its broader downgrade for the Asean+3 region, which comprises the 10 Asean nations plus China, Japan and South Korea.
Amro now projects regional GDP growth of 3.8% in 2025, down from 4.2%, with a further slowdown to 3.6% in 2026, compared to the previous forecast of 4.1%. The downgrade reflects the anticipated impact of US tariffs.
Despite the downward revision, Amro group head and principal economist Allen Ng emphasised that Malaysia’s growth outlook remains relatively healthy.
“Economic growth close to 4% is not a very bad growth — it is still a pretty high growth,” Ng said during Amro's quarterly update on the Asean+3 regional economic outlook briefing on Wednesday (July 23). He highlighted that domestic demand, especially private consumption, continues to support growth.
While Malaysia faces external headwinds due to its high trade exposure, Amro noted that relatively low inflation and a stronger ringgit provide room for monetary policy support if needed. Headline inflation is projected to stay subdued at 2% in 2025 and 2.2% in 2026, offering policymakers flexibility to manoeuvre, it added.
On July 9, Bank Negara Malaysia (BNM) cut the overnight policy rate by 25 basis points to 2.75% for the first time in nearly two years, a timely move in response to downside growth risks following the unexpected 25% US import tariff on Malaysian goods.
Ng described BNM’s rate cut as preemptive, aimed at cushioning the economy amid rising external uncertainties and a benign inflationary trend. He added that further monetary easing could be possible if growth risks worsen, depending on upcoming data.
“We are looking at a situation where the outlook has become considerably more uncertain, driven by external factors, alongside a more benign inflation trend in Malaysia at this stage.
“If downside risks to growth worsen, I believe there is room for the central bank to adopt further accommodative policy support. However, any decision will ultimately depend on the latest data and whether Malaysia’s economic outlook deteriorates,” Ng said.
Amro chief economist Dong He said the recent appreciation of regional currencies, including the ringgit — which has strengthened over 5% against the US dollar this year to RM4.2257 as of Wednesday — creates additional space for monetary easing without undue pressure on exchange rates.
“Traditionally, some central banks are concerned that if they lower rates, it could pressure the exchange rate. But in the current situation, we feel most regional currencies are in a good position,” Dong added.
Source: theedgemalaysia