Malaysia’s Economy Forecast to Grow 4.5% in Q2-2025

Malaysia’s economy is forecast to grow by 4.5% in the second quarter of 2025 based on advance gross domestic product (GDP) estimates, slightly outpacing previous quarter’s 4.4%, Statistics Department Malaysia (DOSM) said on Friday.

This growth is expected to be driven by robust domestic demand amid global headwinds and the momentum was sustained in April and May, with a stronger performance anticipated in June. Overall, the economy is estimated to have grown moderately by 4.4% in the first half of 2025, DOSM said, according to Malaysia’s news agency Bernama.

Chief Statistician Datuk Seri Mohd Uzir Mahidin said that domestic consumption remained the key driver, significantly boosted by the lingering effects of public sector wage adjustments, school holidays and seasonal spending during both Hari Raya Aidilfitri and Hari Raya Aidiladha.

A stable labour market, together with low unemployment and inflation rates, further reinforced household spending.

“Cash assistance programmes such as Sumbangan Asas Rahmah and Sumbangan Tunai Rahmah also contributed to sustaining household consumption during the quarter,” he said.

He also noted that the manufacturing sector experienced varied performance in 2Q, growing by 5.6% in April and moderating to 2.8% in May.

According to him, this growth was largely attributed to sustained activity in the electrical and electronics sub-sector and robust demand from domestic-oriented industries, as indicated by the Industrial Production Index.

“Similarly, distributive trade sales, reflecting consumer and business activities, rose by 4.4% in May, easing from 4.7% in April, supported by steady performances in wholesale and retail trade,” Uzir said.

Nevertheless, the external trade sector was mixed, significantly slower in May, influenced by weaker demand for goods exports.

“Overall, while domestic consumption was a strong pillar. The external components of the economy remained challenging, weighed down by surrounding tariff developments and continued global political uncertainties,” he noted.

Services Primary Driver

Sector-wise, he said that the services remain the primary driver of economic growth in the 2Q 2025, registering a 5.3% growth compared with 5% in the first quarter of 2025, with key contributions from wholesale and retail trade, transportation and storage, and business services sub-sectors.

The manufacturing sector also recorded a growth of 3.8% as against 4.1% in the previous quarter, largely supported by production in electrical, electronic and optical products as well as vegetable and animal oils and fats and food processing.

Mohd Uzir said that the construction sector recorded its sixth consecutive quarter of double-digit growth at 11% vs 14.2% in Q1-2025, supported primarily by non-residential buildings and specialised construction activities.

“The agriculture sector posted a 2% rise as against 0.6% in Q1-2025, which was driven by the oil palm sub-sector. Meanwhile, the mining and quarrying sector declined further to -7.4% (Q1 2025: -2.7%), reflecting lower production across all sub-sectors,” he concluded.