Malaysia: GDP growth softens in Q4
Q4’s deceleration disappoints markets: According to an advance estimate, GDP growth moderated to 4.8% year on year in the fourth quarter from 5.3% in the third quarter. The downtick fell short of market expectations and marked the slowest expansion since Q1 2024. Nevertheless, if confirmed, the expansion will have brought growth to 5.1% in 2024 as a whole, broadly in line with our Consensus.
Agricultural and manufacturing sectors weigh on momentum: Preliminary data showed that the deceleration stemmed from weaker performances in the agricultural and manufacturing sectors. Agricultural output contracted 0.6% annually in Q4 (Q3: +3.9% yoy), marking the worst result since Q2 2023, as adverse weather weighed on palm oil production. In addition, industrial production lost steam, growing 4.8% in Q4 (Q3:+5.5% yoy). Moreover, construction growth moderated to 19.6% in Q4 (Q3: +19.9% yoy). Conversely, services activity growth inched up to 5.3% in Q4 (Q3: +5.2% yoy), and mining activity declined by 1.4% yoy, a softer fall compared to Q3’s 3.9% yoy.
Economy to lose steam: The economy is forecast to accelerate in Q1 2025 but lose steam during the rest of the year, bringing full-year growth in below 2024’s figure. Still-tight monetary conditions and a gradual rise in inflation will temper domestic demand, and protectionist U.S. policies under Trump 2.0 will cap exports growth. Downside risks include higher-than-anticipated inflation and weaker-than-expected U.S. demand for Malaysian exports.
Panelist insight: United Overseas Bank’s Julia Goh and Loke Siew Ting commented on the outlook:
“For 2025, we project Malaysia’s real GDP growth to moderate slightly […] in light of uncertainty on US trade policies and tariffs as well as potential impact from domestic price policy changes on consumption this year. However, there are other domestic levers supporting the growth momentum, such as an expansionary national budget (with total expenditure of MYR421bn or 20.2% of GDP), stable labour market conditions, ongoing investments (including MYR25.0bn by government linked-investment companies or GLICs), increased tourism activity (as Malaysia assumes the ASEAN chairmanship this year), energy transition efforts, implementation of national masterplans and regional development.”