Domestic spending, robust investment pipeline bolster economy amid global headwind
07 Mar 2025
The country’s resilient domestic spending and strong investment pipeline are expected to support the economy amid external headwinds from global trade uncertainties, according to Hong Leong Investment Bank Bhd (HLIB).
In a note, HILB said Malaysia’s economic growth continues to be confronted by downside risks as the global trade war intensifies and President Donald Trump threatens to impose duties on semiconductors.
It said investment activity would be underpinned by further progress in multi-year projects, a healthy investment pipeline, as well as the implementation of various initiatives under the national masterplans.
HLIB highlighted that the Malaysian Investment Development Authority (MIDA) reported approved investments in 2024 amounted to RM378.5 billion compared to RM329.5 billion in 2023.
Nevertheless, the country’s resilient domestic spending and strong investment pipeline are expected to partly mitigate the effects of weaker external demand.
“With Bank Negara Malaysia (BNM) projecting steady growth and manageable inflation, we continue to expect the Overnight Policy Rate (OPR) to remain unchanged at 3.00 per cent through the year,” it said.
Meanwhile, Kenanga Investment Bank Bhd (Kenanga IB) believed despite global central banks leaning towards easing the interest rate – except for the Bank of Japan – Bank Negara Malaysia (BNM) is expected to maintain the OPR throughout 2025.
It said the current rate supports economic growth while managing inflation risks, particularly from the potential impact of subsidy rationalisation.
“Inflation risks persist due to domestic policy adjustments but are expected to be contained through targeted measures,” it added.
Kenanga IB also noted that gross domestic product (GDP) growth remains vulnerable to external uncertainties, including the shifts in US trade policy under the Trump administration.
An escalation in the US-China trade war could slow China’s economic recovery, though its domestic stimulus may help mitigate the impact. Despite these risks, domestic demand is expected to sustain expansion, it said.
“We maintain our 2025 GDP growth forecast at 4.8 per cent in 2025 (2024: 5.1 per cent).
“While this reflects a slight moderation, economic fundamentals remain stable, supported by resilient domestic demand, rising household income, increased tourist arrivals, and continued government spending.
“The outlook also accounts for the normalisation of economic activity following a high base in 2024,” it added.
Source: Bernama
