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MALAYSIA’S economy is displaying resilience in the face of mounting global uncertainties, though economists caution that sustained growth will depend on timely policy responses, economic diversification, and continued domestic strength.
Professor Dr Ahmed Razman Abdul Latiff of Putra Business School said that gross domestic product (GDP) growth hinges on Malaysia’s ability to diversify its economic base, integrate into global markets through trade agreements, and remain agile in the face of international shocks.
“While geopolitical tensions and supply chain disruptions can slow growth in the short term via inflationary pressures and reduced trade, political stability, robust domestic demand, adaptive supply chains, and effective policies can cushion these impacts and support medium- to long-term resilience,” New Straits Times cited him saying.
Socio-Economic Research Centre (SERC) executive director Lee Heng Guie said that although growth has moderated—real GDP averaged 4.4 per cent in the first half of 2025—Malaysia is still on track to achieve Bank Negara Malaysia’s revised full-year estimate of between 4.0 and 4.8 per cent.
However, Lee warned that the second half of 2025 and the year ahead may prove more challenging as trade uncertainties and US tariff measures weigh on export performance.
“Domestic demand will have to hold firm amid rising cost of living and increased business costs. Positive labour market conditions and continued cash handouts will help the targeted B40 and low-income households.
“While the ongoing implementation of projects and the realisation of approved investments are expected to maintain positive investment momentum, it is to be expected some investors may adopt a wait-and-see approach given the shift in trade policy due to the US’s sweeping tariffs policy,” he said.
Associate Professor Dr Aimi Zulhazmi Abdul Rashid of UniKL Business School emphasised the need for coordinated fiscal and monetary policies to ensure steady economic expansion.
“If the government adopts an expansionary fiscal policy with a large budget to stimulate development, Bank Negara’s monetary policy should complement it by ensuring access to cheaper funds for businesses and consumers,” he said.
“Consequently, business and consumer expenditure will rise, as will fiscal spending by the government—these two components are significant contributors to GDP growth.
“This will help balance the other two components—shrinking trade surplus and the actual flow of foreign direct investment into the country—which are not directly within the government’s control.”
He added that Malaysia remains particularly vulnerable to global trade volatility due to its export-oriented economy.
“Malaysia, among the top 30 trading nations, is highly vulnerable to global events, with GDP growth disrupted during the pandemic years, 2020–2021, and again in 2023, which recorded only 3.6 per cent.
“The growth in 2023 was influenced by a challenging external environment, including slower global trade and a global tech downcycle. However, domestic demand and a resilient external position supported the economy,” he said.
Household Debt Remains Stable but Requires Monitoring
Despite reaching RM1.65 trillion, economists noted that Malaysia’s household debt remains manageable, provided key indicators remain stable.
“As long as the non-performing loan rate remains low and repayment rates stay high—as is currently the case—household debt is sustainable,” said Ahmed Razman. “However, more efforts are needed to explore and champion alternatives to debt financing, which already exist.”
Lee noted that household debt growth has been primarily driven by housing and vehicle loans, with moderate expansion in personal financing, credit cards, and ‘buy now, pay later’ schemes.
As of December 2024, total household financial assets were 2.1 times the size of household debt, while the median debt-to-income (DTI) ratio stood at 1.4 times.
“Some households with low financial buffers are more vulnerable to income and employment shocks, and could face greater difficulties servicing debt amid rising costs of living.
“The Credit Counselling and Debt Management Agency (AKPK) and banks are available to support distressed households and borrowers seeking debt restructuring or repayment assistance,” he added. - August 19, 2025
