KUALA LUMPUR: RHB Investment Bank Bhd (RHB IB) has maintained its 2025 gross domestic product (GDP) forecast at 4.5 per cent year-on-year (YoY), despite Malaysia’s first quarter 2025 (1Q 2025) GDP growth data coming in slightly lower than expected at 4.4 per cent.
The investment bank said in a note today that the downside risks of growth slowing to 3.5-4.0 per cent appear limited, thanks to the recent progress in US-China trade talks.
“However, we urge caution against premature optimism -- risks may still linger after July 8, when the initial 90-day postponement of tariffs expires.
“Thus far, the exemption from tariffs has been limited to China and the UK, with little information regarding other regions,” it added.
Despite a cautious view on external developments, several factors are expected to support Malaysia’s economy amid heightened external uncertainties, said the investment bank.
“Domestic demand, in particular, is anticipated to cushion the potential blows from these external challenges as the domestic economy has demonstrated resilience, driven by robust consumer spending and steady investment.
“Strategic initiatives within the MADANI Economy framework, including the National Energy Transition Roadmap and the New Industrial Master Plan 2030, are set to stimulate investment flows over the medium term,” it said.
Meanwhile, OCBC senior ASEAN economist Lavanya Venkateswaran said she expects GDP growth to slow to 4.3 per cent YoY in 2025 versus 5.1 per cent in 2024, with the current account surplus likely to be 1.7 per cent of GDP in 2025 versus 1.4 per cent in 2024.
“Under such circumstances, counter-cyclical policy measures will likely be adopted, includlng potential shifts in the government’s RON95 rationalisation agenda, targeted support for small and medium enterprises (already started) and targeted additional tax relief.
“For its part, Bank Negara Malaysia (BNM) sounded more dovish at its May 8 meeting, highlighting the heightened uncertainties and downside risks to growth, and it reduced the Statutory Reserve Requirement (SRR) from two per cent to one per cent, effective May 16, releasing RM19 billion of liquidity into the system,“ she said in a separate note.
Lavanya said further action from BNM boils down to how elevated levels of uncertainty feature in BNM’s reaction function.
“We now bring forward our call for BNM to cut its policy rate by a cumulative 50 basis points to the second half of 2025 (2H 2025) from 1H 2026, allowing space for BNM to be pre-emptive.
“We will determine the exact timing of the rate cuts in terms of July 9, Sept 4 and Nov 6 meetings based on incoming economic data and tariff negotiation outcomes with the US,” she added.
