KUALA LUMPUR: The Malaysian economy is expected to maintain a sustainable growth rate of 5% in 2025 from an estimated 4.9% in 2024, supported by a stable labour market condition, conducive fiscal and monetary policies amid lingering external uncertainties, said an economist.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid told Bernama that investment activities are likely to be the main driver for growth as the government is committed to transitioning Malaysia into a developed nation.
In this regard, the government-linked investment companies through the GEAR-uP initiative are set to allocate RM120 billion to direct domestic investment over five years.
“The initiative will unlock Malaysia’s growth potential through investments in high-growth high-value sectors such as the energy transition, advanced manufacturing, especially in the semiconductor industry, and across all life cycles of firms from startups and venture capital to mid-tier companies,” he said.
Mohd Afzanizam said the growing prominence of artificial intelligence has shifted greater focus to the technology sector, positioning it as a key driver for boosting productivity and efficiency in the economy.
He highlighted the development of data centres, driven by significant private sector investment, as a crucial growth catalyst.
“These projects directly benefit industries such as construction, property, energy, water, and other supporting services,” he said, adding that Malaysia’s semiconductor-related exports are expected to align with sustained global demand in 2025.
Citing World Semiconductor Trade Statistics, Mohd Afzanizam said global semiconductor sales are projected to grow at a robust rate of 11.2% in 2025, following a strong 19.0% growth last year.
Mohd Afzanizam noted that, beyond technology, increased government development expenditure, with a total allocation of RM86 billion for 2025 would also provide significant support for domestic growth.
He said the Public-Private Partnership Masterplan 2030 aims to enhance project governance and accelerate execution.
“Major infrastructure projects under this initiative including motorways, railways, ports, and airports, are set to drive economic development and connectivity,“ he added.
Additionally, state-level economic initiatives such as the Johor-Singapore Special Economic Zone, the Malaysia IC Design Park in Selangor, and the Blue Economy initiative on the East Coast are expected to serve as key growth catalysts.
Mohd Afzanizam identified geopolitics, particularly the ongoing conflict in the Middle East and Ukraine, as the primary concern for 2025, which could significantly impact financial market sentiments and potentially disrupt the supply chain.
He also expressed concerns about the potential United States import tariffs under the new administration, which could exacerbate inflation and compel the Federal Reserve to maintain a restrictive monetary policy stance.
“Domestically, a possible reversal of key economic reforms, especially the rationalisation of fuel subsidies, could undermine market confidence, particularly affecting the ringgit.
“To mitigate these challenges, maintaining the overnight policy rate (OPR) at 3.00% throughout 2025 would be a prudent measure. This approach would help narrow the gap between the OPR and the Federal Funds Rate,” he added.
