Malaysia’s economy expanded faster than anticipated in the second quarter of 2025, primarily driven by the robust performance of its services sector, even as the nation navigates the implications of global tariffs imposed by U.S. President Donald Trump.
According to advance estimates released by the statistics department, the Gross Domestic Product (GDP) recorded a 4.5% year-on-year increase during the April-June period. This growth rate surpassed the median estimate of 4.2% in a Bloomberg survey and accelerated from the 4.4% expansion observed in the first three months of the year.
This latest economic data may offer some relief to policymakers as they re-evaluate their 2025 growth projection of 4.5%-5.5%. Malaysia is currently facing the threat of a 25% U.S. import levy, and officials are actively engaged in negotiations to secure a lower tariff before its scheduled implementation on August 1.
In a separate statement, the statistics agency reported an unexpected 3.5% year-on-year decline in exports for June. This contrasted sharply with analysts’ median estimate of a 5.4% increase, as indicated by a Bloomberg survey. Imports, however, saw a 1.2% rise, while overall trade registered a 1.2% contraction.
Lavanya Venkateswaran, an analyst at Oversea-Chinese Banking Corp., suggested that these figures indicate a waning effect of frontloaded shipments to the U.S. “Overall, we see the incoming data as mixed, suggesting weakening external demand amidst better domestic demand conditions,” she commented. Venkateswaran maintained her annual GDP growth forecast at 3.9% and anticipates another 25-basis-point interest rate cut by the central bank later this year.
Last week, the central bank proactively reduced interest rates by a quarter point to support the economy, cautioning that “the balance of risks to the growth outlook remains tilted to the downside.”
Data from the statistics department also showed a deceleration in manufacturing growth, which slowed to 3.8% in the second quarter from 4.1% in the preceding three months. Conversely, the services sector experienced an acceleration in growth to 5.3%, up from 5% in the previous quarter, with significant contributions from wholesale and retail trade, alongside transportation and storage businesses.
“Malaysia’s economy is estimated to have expanded by 4.4% in the first half of 2025,” the government agency stated. The construction sector, while moderating, still posted an impressive 11% expansion, marking its sixth consecutive quarter of double-digit growth.
These advance GDP estimates are based on available information from April and May, complemented by statistical estimations. Preliminary GDP data, which will offer a comprehensive analysis of the second quarter’s economic performance, is slated for release on August 15.
