Malaysia’s Economy Set to Exceed 5% Growth Rate in 2025
PUTRAJAYA: Malaysia’s growth is expected to sustain last year’s pace and exceed 5% in 2025, driven by strong foreign direct investments and support from local funds, according to Finance Minister II Amir Hamzah Azizan.
Economic Outlook
The country is already on a positive track, with the government likely to beat its 2024 deficit target of 4.3% of the gross domestic product. The government plans to narrow the gap further to 3.8% of GDP this year. "We have a good base because foreign direct investments remain strong and a lot of activity that’s generated is now playing out through the economy," Amir said.
Fiscal Health
Restoring fiscal health is key for Malaysia to retain emerging Southeast Asia’s highest credit score as Prime Minister Anwar Ibrahim’s government restores political stability and drives the nation’s economic resurgence. Officials expect GDP to grow by about 4.5% to 5.5% this year, largely exceeding the 4.7% expansion predicted by analysts surveyed by Bloomberg.
Government-Linked Investment Companies
Government-linked investment companies, which manage almost RM2 trillion (US$444 billion) in assets combined, have also boosted their direct investments in the economy, contributing to growth, Amir said. "Traditionally GLICs will invest, plus or minus, nearly half a trillion ringgit over a five-year period," he said. "They’re boosting it up by another 120 billion over a five-year period. So that’s a fairly significant step up."
Other Growth Drivers
Higher salaries for civil servants and plans to increase the minimum wage in the private sector are also poised to boost domestic demand. The strength of the economy and foreign direct investments will continue to support the ringgit, Amir said. "Imports are measured, exports are growing still, and supportive mechanisms allow us better tools to use to cushion blows," he said.
Currency Performance
The ringgit was the best performer across emerging markets in 2024, strengthening 2.7% against the dollar, ending three consecutive years of declines. Amir is confident that the nation’s diversified economy would withstand the threat of Donald Trump’s tariffs and the trade wars that have rattled developing-nation assets.
Conclusion
In conclusion, Malaysia’s economy is expected to continue its strong growth trajectory in 2025, driven by foreign direct investments, government-linked investment companies, and other growth drivers. The government’s efforts to restore fiscal health and drive economic recovery are likely to pay off, supporting the nation’s economic resilience.
FAQs
Q: What is the expected growth rate for Malaysia’s economy in 2025?
A: Malaysia’s economy is expected to exceed 5% in 2025, driven by strong foreign direct investments and support from local funds.
Q: What is the government’s target for the deficit target in 2024?
A: The government plans to narrow the gap further to 3.8% of GDP this year.
Q: What is the role of government-linked investment companies in driving growth?
A: Government-linked investment companies have boosted their direct investments in the economy, contributing to growth, and are expected to continue to do so in the future.
Q: How does the ringgit’s performance affect the economy?
A: The ringgit’s strength is a positive sign for the economy, indicating a stable and attractive investment environment, and supporting foreign direct investments and economic growth.