KUALA LUMPUR, Oct 18 — Malaysia’s economy is projected to grow between 4.5 per cent and 5.5 per cent in 2025, against 4.8 per cent and 5.3 per cent in 2024, said the Finance Ministry (MOF).
In its Economic Outlook 2025 report released today, the ministry said the economy is boosted by the services sector, strong private sector expenditure and stable global trade.
The services sector, which is projected to register 5.5 per cent in 2025, continued to uphold its position as the main driver of growth contributed by tourism activities, sustained exports, and the acceleration of Information and Communication Technologies-related activities.
Meanwhile, the manufacturing sector is projected to expand further attributed to better performance in export-oriented industries, primarily the electrical and electronics segment as external demand for semiconductors continues to increase.
Overall, the MOF said the real gross domestic product (GDP) in 2024 is revised upward ranging between 4.8 per cent and 5.3 per cent, surpassing the initial target of 4.0 per cent to 5.0 per cent, supported by favourable economic performance amid persistent challenges in the external environment.
For 2025, headline inflation is projected to remain manageable at between 2.0 per cent to 3.5 per cent in 2025, with the easing of global supply constraints and the moderation of global commodity prices.
“However, some upward inflation pressure could emerge from anticipated domestic policy measures,” it said, adding that the Producer Price Index is expected to moderate following the stable production activities.
On the income side, the compensation of employees is anticipated to grow supported by the implementation of the new minimum wage rate and upward salary revision for civil servants, among others.
Labour Market
The labour market is projected to remain stable in 2025, in tandem with better economic growth prospects anticipated on both domestic and external fronts.
Strategies to address structural issues in the labour market, particularly related to wages and productivity, were expected to enhance business efficiency and boost labour demand.
“Hence, the unemployment rate is forecast to improve further to 3.1 per cent in 2025. Total employment is projected to record a growth of 2.1 per cent to 16.6 million persons, with more than 80 per cent of employment opportunities concentrated in the services and manufacturing sector,” the MOF said.
Labour productivity is projected to rise by 2.7 per cent to RM101,700 next year spearheaded by wider adoption of advanced technologies, digitalisation, and modern management practices across enterprises to enhance value chains, particularly in the high growth high-value industries.
Government remains committed to fulfilling long-term vision, inclusive growth
Prime Minister cum Finance Minister Datuk Seri Anwar Ibrahim said the government remains resolute in fulfilling its long-term vision of sustainable and inclusive growth, while the Madani Economy framework will continue to serve as the government’s guiding blueprint for economic policies and reforms.
“By fostering a competitive and innovative economy, improving public sector efficiency and promoting social equity, we aim to create a prosperous future for all Malaysians. The collective efforts of the government, private sector and rakyat are paramount towards realising this vision,” he said.
The government also made significant strides in fiscal consolidation, as the fiscal deficit is anticipated to narrow to 4.3 per cent of the GDP in 2024 and would further improve to 3.0 per cent in the medium term.
Anwar said the government’s commitment to prudent debt management and the transition to targeted subsidies are central to fiscal reform, ensuring a sustainable and strong financial position for Malaysia, and providing a secure foundation for Malaysia’s future economic growth.
Malaysia private, public consumption to grow in 2025
Accounting for about 60 per cent of the economy, private consumption is projected to continue spearheading growth.
It is expected to increase by 5.9 per cent mainly attributed to the improvement in disposable income, and this will be supported by sustained economic activities and robust labour market conditions, as well as the implementation of the Public Service Remuneration System (SSPA).
The MOF said other contributory factors include continued targeted cash assistance programmes, which will further support household spending in 2025.
Meanwhile, domestic demand is expected to expand by 6.1 per cent next year, buoyed by private sector expenditure, growing by 6.6 per cent.
“With strong consumption and investment spending, the private sector contribution to GDP growth will remain high at 5.1 percentage points,” it said.
Public expenditure will grow by 4.1 per cent and contribute 0.7 percentage points to GDP growth.
In terms of public consumption, the sector is projected to rise by 3.8 per cent driven primarily by increased spending on emoluments following the SSPA’s implementation.
Sectoral growth in 2025
The MOF said prospects for the agriculture sector remained positive supported by higher production of crude palm oil (CPO) and demand from food-related industries.
The performance of the agriculture sector is expected to remain stable in 2025, with a growth of 1.9 per cent supported by all subsectors, except for forestry and logging.
The oil palm subsector is poised to increase at a modest pace, underpinned by high fresh fruit bunch production and yield, following larger oil palm harvestable areas, favourable weather conditions, and a better labour market.
The CPO price is forecast to stabilise within the range of RM3,500 and RM4,000 per tonne given the better global production and, in addition, higher global output of soybean oil and steady demand for the commodity from major importing countries are anticipated to contribute to the price stabilisation.
The rubber subsector is also projected to grow, underpinned by an increase in natural rubber output particularly from the smallholder segment, which remains the largest contributor to total production.
“This is also backed by sustained economic growth which will provide better employment opportunities for the rakyat,” it said.
Amid stable global economic growth, the manufacturing sector is expected to strengthen by 4.5 per cent next year, mainly driven by implementing major policies including the New Industrial Master Plan 2030 and the National Semiconductor Strategy.
The MOF said both domestic and export-oriented industries continued to uphold the sector’s performance in line with resilient domestic demand and favourable external environment.
In contrast, the mining sector is forecast to decline marginally due to scheduled plant shutdowns for maintenance purposes.
It is also expected to contract by 1.0 per cent in 2025, following a sluggish performance in key subsectors, including natural gas which is projected to decline as output decreases mainly due to the planned shutdown of two facilities in Sarawak for maintenance purposes and moderating demand from major importing countries including Japan and China.
The overall production of natural gas is expected to remain below the 2024 capacity, despite several new plants being scheduled to commence operations including the Bindu Field in Terengganu, and Gumusut-Kakap-Geronggong-Jagus East in Sabah.
In terms of prices, Brent crude oil is projected to average between US$75 (RM323) and US$80 (RM344) per barrel in 2025.
Meanwhile, the construction sector is forecast to register a growth of 9.4 per cent in 2025, largely driven by the acceleration of strategic infrastructure projects.
It said the sector is expected to benefit particularly from civil engineering activities like LRT3’s Phase Two and Phase Two of the Sarawak-Sabah Link Road.
Furthermore, the residential buildings sector is anticipated to expand, driven by sustained demand for affordable housing as underlined by the Madani Economy framework, alongside new development projects by the private sector.
— Bernama
