Malaysia’s economy expanded 4.4% year-on-year in the second quarter of 2025, maintaining the same pace as the previous quarter, according to the latest Malaysian Economic Statistics Review (MESR), Volume 8/2025, released by the Department of Statistics Malaysia (DOSM). On a seasonally adjusted basis, GDP rose 2.1%, bringing growth for the first half of 2025 to 4.4%, a moderation from 5.0% in the same period last year.
Chief Statistician Malaysia, Dato’ Sri Dr. Mohd Uzir Mahidin, said growth momentum was underpinned by the Services sector, driven by resilient domestic consumption and investment. The Services Volume Index rose 5.1% to 159.9 points, while the Wholesale & Retail Trade, Food & Beverage, and Accommodation segment contributed strongly with revenue up 4.9% to RM484 billion. Strong domestic travel and steady inflows of international visitors lifted spending during festive and holiday periods.
Trade and Investment Trends
Malaysia’s Current Account Balance narrowed sharply, recording a surplus of just RM0.3 billion compared to RM4.3 billion a year ago, supported mainly by net exports of goods. Foreign Direct Investment (FDI) inflows moderated to RM1.6 billion from RM9.6 billion in Q2 2024, mostly channelled into the Services sector. In contrast, Direct Investment Abroad (DIA) saw a reversal, with a net inflow of RM0.6 billion versus a net outflow previously, mainly into Manufacturing and Services.
Total merchandise trade expanded 6.1% year-on-year to RM749.2 billion in Q2. Exports rose 3.4% to RM381.8 billion, while imports surged 9.0% to RM367.4 billion, resulting in a significantly smaller trade surplus of RM14.4 billion, down 55.3% year-on-year. However, momentum improved in July 2025, when total trade grew 3.8% to RM265.9 billion, exports strengthened 6.8% to RM140.4 billion, and imports rose 0.6% to RM125.5 billion, leading to the highest trade surplus of the year at RM15 billion.
Inflation and Price Conditions
Consumer inflation eased to 1.1% in June 2025, compared to 1.2% in May, reflecting stable price conditions. Inflation for Restaurants & Accommodation Services slowed to 2.8%, while Food & Beverages held steady at 2.1%. For Q2 overall, inflation averaged 1.3%, lower than Q1’s 1.5%.
However, the Producer Price Index (PPI) for local production fell sharply by 4.2% in June, led by Mining (-8.0%) and Manufacturing (-4.3%). For the full quarter, the PPI contracted 3.7%, pointing to soft global commodity markets and cost adjustments in upstream industries.
Labour Market Strengthens
Malaysia’s labour market showed further improvement, with the labour force rising 2.7% year-on-year to 17.37 million in Q2. Employment grew 2.9% to 16.85 million, bringing the unemployment rate down to 3.0%, the lowest since the pandemic. The labour force participation rate (LFPR) inched up to 70.8%, while the employment-to-population ratio rose to 68.7%.
Outlook and Risks
Despite resilient domestic demand, DOSM cautioned that global uncertainties remain a key challenge. Malaysia’s Leading Index (LI), a predictor of future economic activity, dipped slightly by 0.2% in June to 113.4 points, staying below its long-term trend and suggesting a potential moderation ahead.
Dr. Uzir emphasised that Malaysia must continue to diversify growth drivers, reinforce domestic demand and accelerate productivity-led strategies to withstand external risks and secure sustainable, long-term economic growth.
Source: https://www.businesstoday.com.my/2025/08/31/malaysias-economy-remains-resilient-underpinned-by-robust-services-and-manufacturing-activities/