BNM projects Malaysia’s economy to grow between 4.5% and 5.5% in 2025

BANK Negara Malaysia (BNM) has projected the Malaysian economy to expand between 4.5% and 5.5% in 2025, underpinned by resilient domestic demand and ongoing investment activity, despite external uncertainties.

In its Economic and Monetary Review 2024 released today, BNM said that “employment and income growth will continue to drive household spending,” while investment is expected to remain robust, supported by the continuation of multi-year projects.

“Measures outlined in Budget 2025, including initiatives on income enhancement, will further support consumption,” the central bank noted, adding that Malaysia’s external sector is projected to grow at a more moderate pace amid global economic uncertainties.

However, exports are still expected to benefit from “the continued global technology upcycle and higher tourist spending.”

Resilient Domestic Demand

BNM expects domestic demand to remain the key driver of growth, with steady private sector expenditure. “Improving labour market conditions alongside continued policy support will drive higher household spending,” it said.

The unemployment rate is forecasted to decline further to 3.1%, below its long-term average, as employment expands.

Additionally, income growth is anticipated to pick up, supported by increased labour utilisation and wage-related policy measures, including salary increments for civil servants under the Public Service Remuneration System (SSPA) and a higher minimum wage.

“The higher household income, alongside a larger disbursement of targeted cash transfers, will help to alleviate the cost-of-living pressures faced by low- and middle-income earners,” BNM added.

Meanwhile, the targetted approach to policy reforms, such as the RON95 fuel subsidy rationalisation and the expansion of the Sales and Services Tax (SST), aims to minimise their impact on living costs and domestic spending.