Stable leadership and pro-business policies fuel a year that outperforms forecasts
KUALA LUMPUR: Malaysia’s stronger-than-expected performance propelled fourth-quarter 2025’s (4Q 2025) gross domestic product (GDP) to a three-year high of 6.3 per cent, with full-year growth reaching 5.2 per cent, reflecting consistent policymaking, political stability and a conducive business environment.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the Malaysian economy performed above the four per cent to 4.8 per cent government forecast, surpassing consensus expectations despite cautious sentiment among most economists last year due to uncertainty over the impact of US tariffs.
“The government’s resolve towards fiscal consolidation has resulted in savings, allowing it to channel savings towards cash transfer programmes.
“Coupled with full employment status, consumer spending has been resilient as a result. Furthermore, the investment activities among private firms have been commendable,” he told Bernama.
The full-year 2025 GDP climbed to 5.2 per cent, up from the 5.1 per cent achieved in 2024 on strong domestic demand and favourable exports, while GDP for 4Q 2025 advanced by 6.3 per cent from 5.0 per cent in 4Q 2024, driven mainly by domestic demand.
Earlier, advance estimates and market consensus had projected full-year growth at 4.9 per cent, while the Statistics Department Malaysia had put 4Q 2025 advance estimates at 5.7 per cent.
Meanwhile, International Islamic University Malaysia (IIUM) Associate Professor of Economics Dr Muhammad Irwan Ariffin said last year’s US tariffs announcement created uncertainty, particularly when initial rates of up to 25 per cent were proposed, which weighed on investor sentiment in the short term, especially among export-oriented and technology firms that rely on the US market.
“When trade policy becomes unpredictable, businesses tend to delay investment decisions. However, the overall economic impact on Malaysia was ultimately mixed rather than severely negative. The tariff rate was later reduced, and bilateral negotiations helped stabilise expectations,” he said.
He said Malaysia’s domestic demand remained strong and exports proved more resilient than feared.
“So while the tariffs introduced external headwinds and caution over the investment climate, they did not derail economic momentum, he said, adding that market diversification of markets and strong domestic fundamentals can help cushion external shocks.
Moving forward, Muhammad Irwan said the 2026 outlook remains positive, provided the strong momentum seen in Malaysia’s 2025 economic performance continues to be supported by productivity-enhancing investments, expansion in high-value exports and the development of a skilled workforce.
“But we must remain cautious about global uncertainties and ensure fiscal consolidation does not undermine growth,” he added. – BERNAMA
