Malaysia's economy grows at fastest pace in 3 years in 2025, exceeding expectations

Full-year 2025 economic growth reached 5.2%, a notch above the 5.1% expansion the previous year and exceeding official projections of between 4% and 4.8% to record the Southeast Asian economy's highest growth rate since the 9% achieved in 2022, government and central bank data showed.

Gross domestic product expanded 6.3% 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% from 5.2%.

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% in the October to December period.

On a quarter-on-quarter seasonally-adjusted basis, GDP rose 0.8% from October to December of 2025, compared to 2.7% 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% and 4.5% this year, amid persisting uncertainties about the impact of U.S. tariffs. Malaysia faces a 19% levy on goods exported to the United States.

The central bank kept its key interest rate (MYINTR=ECI) unchanged at 2.75% 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% 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% and 2%, 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% 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.