Malaysia's economy grows at fastest pace in 3 years in 2025, exceeding expectations
People line up to pay at a supermarket in Subang Jaya, Malaysia October 12, 2020. REUTERS/Lim Huey Teng
KUALA LUMPUR, Feb 13 : Malaysia's economy expanded at its fastest pace in three years in 2025, surpassing expectations as strong domestic demand, exports and investment propelled growth, with momentum likely to continue this year, the central bank said on Friday.
Full-year 2025 economic growth reached 5.2 per cent, a notch above the 5.1 per cent expansion the previous year and exceeding official projections of between 4 per cent and 4.8 per cent to record the Southeast Asian economy's highest growth rate since the 9 per cent achieved in 2022, government and central bank data showed.
Gross domestic product expanded 6.3 per cent in the fourth quarter of 2025 compared to a year earlier, its fastest pace in twelve quarters, also exceeding expectations. Third-quarter growth was revised upwards to 5.4 per cent from 5.2 per cent.
Economists surveyed by Reuters and advance estimates released by the government had forecast that year-on-year GDP growth would come in at 5.7 per cent in the October to December period.
On a quarter-on-quarter seasonally-adjusted basis, GDP rose 0.8 per cent from October to December of 2025, compared to 2.7 per cent in the preceding three months.
GROWTH MOMENTUM TO CONTINUE
The central bank said household spending will benefit from employment, wage growth and government policies this year, while investment activity and exports will remain robust.
"This growth momentum is expected to continue in 2026, supported by resilient domestic demand and exports," Bank Negara Malaysia Governor Abdul Rasheed Ghaffour said in a statement.
The government and central bank expect the economy to grow between 4 per cent and 4.5 per cent this year, amid persisting uncertainties about the impact of U.S. tariffs. Malaysia faces a 19 per cent levy on goods exported to the United States.
The central bank kept its key interest rate unchanged at 2.75 per cent during its first policy review of 2026 last month, citing steady economic growth, modest inflation and a positive outlook for the year.
Bank Negara Malaysia last lowered its main policy rate in July 2025 in a preemptive move made after U.S. President Donald Trump imposed steep tariffs on most trading partners.
Since then, trade-related uncertainty has eased after the tariff rate on Malaysia was reduced to a level broadly in line with other Asian peers.
In a Reuters poll, Malaysia's economy is projected to grow 4.5 per cent this year, at the upper end of the government's forecast range. Meanwhile, its central bank is also expected to keep its benchmark interest rate on hold in 2026, with some economists expecting the next possible move to be a hike not a cut.
Malaysia could raise its economic growth outlook for this year, its second finance minister said earlier this month, following a string of recent positive signals.
DOMESTIC FUNDAMENTALS, INFLOWS TO SUPPORT RINGGIT
Headline and core inflation averaged 1.4 per cent and 2 per cent, respectively, in 2025, the central bank said, adding that the rate is expected to remain moderate this year.
The central bank said while the ringgit will continue to be influenced by external factors, resilient domestic fundamentals and its efforts to encourage market flows are expected to provide support to the currency.
The ringgit has gained about 17 per cent since the start of 2024, making it the best-performing Asian currency over the period. It is currently trading at its strongest levels in eight years against the U.S. dollar.
