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BANK NEGARA Malaysia (BNM) Governor Datuk Seri Abdul Rasheed Ghaffour has expressed confidence that the country's robust domestic demand will continue to serve as a key buffer against external uncertainties, such as potential impacts from U.S. tariffs and other global economic challenges.
Speaking after the release of BNM’s flagship reports, Ghaffour highlighted Malaysia’s position of strength, underpinned by solid domestic consumption.
"We are in a position of strength. We have a very strong domestic demand, and this will continue to support growth," he stated, reassuring that the nation’s economic resilience remains intact despite external turbulence.
Ghaffour further explained that private consumption would remain a driving force, supported by rising income levels, an improving labour market, and healthy household balance sheets, which will help provide stability to the economy.
"Higher income prospects, improving labour market conditions, as well as healthy household balance sheets, will act as buffers to the economy," he said.
In addition to consumption, Ghaffour pointed to private investment as another crucial pillar, with Malaysia benefitting from a positive investment cycle and high realisation rates for approved investments.
This combination, he explained, would continue to boost domestic growth prospects, reinforcing the nation's economic trajectory.
Despite the potential challenges posed by global uncertainties, Ghaffour’s comments reflect optimism regarding Malaysia's capacity to weather external shocks, with domestic demand playing a pivotal role in sustaining economic stability.
Inflation Manageable at 2.0% and 3.5% This Year
The central bank forecasted inflation in Malaysia to rise between 2.0% and 3.5% in 2025, compared to a lower average of 1.8% in 2024.
Despite this increase, the central bank reassured that inflation would remain manageable, bolstered by easing global cost pressures and the absence of excessive demand-side pressures within the domestic economy.
In its Economic and Monetary Review 2024, BNM highlighted that global commodity prices are expected to continue to moderate, helping reduce production costs for businesses across the country.
"The inflationary impact from announced domestic policy measures and tax adjustments, including the targeted RON95 subsidy rationalisation and the expansion of the sales and services tax (SST), is expected to be temporary and well-contained," the bank stated.
It added that the direct impact of these measures should dissipate within a year, given the targeted and measured approach of the policies.
BNM also indicated that domestic demand conditions will remain stable, supported by steady private consumption growth and wage increases that align with productivity growth. This stability is expected to keep inflation in check despite higher prices for certain goods and services in the short term.
Looking ahead, the Malaysian economy is forecasted to grow between 4.5% and 5.5% in 2025, with domestic demand being the main driver of this growth.
BNM pointed to higher household spending, underpinned by job growth and rising incomes, as well as continued expansion in investment activity, driven by a robust investment cycle.
"Investment activity will continue to see robust expansion as the investment upcycle persists into 2025," it added.
In 2024, Malaysia saw a moderation in both headline and core inflation, with averages of 1.8% compared to 2.5% in 2023 and 3.0% in 2022.
This decrease in inflation was largely attributed to easing global cost conditions and stable domestic demand, with the country's headline inflation falling below its historical average of 2.2% from 2011 to 2019.
The overnight policy rate (OPR) was maintained at 3.00% throughout 2024 to support price stability and sustainable economic growth.
BNM confirmed that its monetary policy committee (MPC) will remain alert to the potential spillovers from an uncertain global environment and the impact of any domestic policy changes.
“Amid this uncertainty, the formulation of monetary policy will continue to be guided by the evolving balance of risks surrounding the outlook on Malaysia’s inflation and growth,” BNM added. March 25, 2025