Malaysia remains committed to long-term structural reforms to achieve high-income status despite the risks posed by a potential global trade war and escalating geopolitical tensions, the country’s central bank said on Monday.
Bank Negara Malaysia (BNM) maintained its 2025 growth forecast at 4.5% to 5.5%, citing strong domestic demand as a key driver. In its 2024 annual report, the central bank highlighted that the economy expanded by 5.1% last year, supported by robust domestic consumption, record-high approved investments, and steady export performance.
BNM Governor Abdul Rasheed Ghaffour stated that navigating an increasingly complex economic environment requires deepened structural reform efforts. He emphasized that the positive momentum from 2024 provides a solid foundation for further progress.
Exports are projected to grow 5.2% in 2025, slightly moderating from the 5.7% expansion recorded last year. The governor underscored the importance of strengthening trade ties, exploring new markets, and enhancing competitiveness as global protectionism continues to reshape supply chains.
Malaysia’s government is moving forward with fiscal reforms, including the removal of blanket fuel subsidies and an expansion of the sales and services tax (SST). While these measures are expected to lead to short-term price increases, their impact on underlying inflation is projected to be limited and temporary.
To mitigate the effects of these reforms, the government has announced record budget spending and salary hikes for civil servants. Inflation is forecasted to range between 2% and 3.5% in 2025, with core inflation expected between 1.5% and 2.5%, compared to 1.8% for both indicators in 2024.
The central bank signaled a cautious approach to monetary policy, stating it will closely monitor global developments and domestic reform spillovers while ensuring price stability and sustainable growth. BNM has kept its key interest rate steady at 3.00% since May 2023, and economists anticipate it will remain unchanged through 2025.
The ringgit’s performance will be influenced by monetary policy shifts in major economies, with a narrowing of interest rate differentials between the U.S. and other global markets expected to provide support for Malaysia’s currency. Despite external headwinds, the country is pressing ahead with structural reforms, relying on domestic demand, fiscal adjustments, and trade expansion to sustain economic growth while maintaining monetary stability.
