PETALING JAYA: The Malaysian economy expanded strongly by 6.3% year-on-year in the fourth quarter of 2025, up from 5.4% in the third quarter, largely supported by firm domestic demand, Bank Negara Malaysia (BNM) announced today.
BNM governor Datuk Seri Abdul Rasheed Ghaffour said in a statement that Malaysia’s economy grew by 5.2% in 2025, on account of strong domestic demand and favourable exports, exceeding the forecast range of 4%-4.8%.
“This growth momentum is expected to continue in 2026, supported by resilient domestic demand and exports.”
Reviewing the economy’s fourth-quarter performance, BNM noted that household spending improved amid favourable labour market conditions and income-related policy support.
The central bank also noted that strong investment growth was underpinned by increased machinery and equipment spending, particularly for data centres, and by ongoing implementation of multi-year projects across both the private and public sectors.
In the external sector, exports continued to strengthen, led mainly by stronger exports of electrical and electronic (E&E) goods. Inbound tourism and information and communication technology-related services also contributed to the growth of services exports and the current account surplus.
Meanwhile, BNM noted that imports remained strong, driven by the rebound in intermediate goods to support economic activity and productive capital-related goods reflecting the realisation of ongoing investment projects.
On the supply side, growth was mainly accounted for by the expansion in the services and manufacturing sectors.
Higher growth in the services sector was mainly driven by consumer-related subsectors, government services and the ICT subsector, following the operationalisation of data centres.
In the manufacturing sector, BNM noted that performance was driven by stronger production in the E&E sub-sector, spurred by higher demand from global technology expansion, alongside increased output of consumer-related goods.
Meanwhile, the agriculture sector strengthened, reflecting higher growth for palm oil amid less severe flooding than last year.
On the foreign exchange front, BNM said the ringgit appreciated against currencies of trading partners in the fourth quarter of 2025 The ringgit’s nominal effective exchange rate (NEER) strengthened by 3.8% against currencies of Malaysia’s major trading partners. The ringgit appreciated by 3.9% against the US dollar.
These movements were driven by both external and domestic factors.
On the external front, the narrowing of interest rate differentials following the US Federal Reserve’s policy rate cuts in October and December has supported the ringgit during the quarter.
In addition, the central bank said the ringgit’s appreciation was driven by lower tariff-related uncertainties as the US concluded trade agreements with several of its trading partners in the region, including Malaysia.
Domestically, Malaysia’s positive economic prospects, underpinned by reform efforts, have continued to reinforce investor confidence and improve overall sentiment in domestic financial markets.
BNM said for 2025, the ringgit appreciated by 10.2% against the US dollar, while the ringgit’s NEER appreciation was at 6.3%.
Moving forward, the central bank said movements in the ringgit will continue to be influenced by external factors.
Nonetheless, resilient domestic fundamentals are expected to provide enduring support to the ringgit.
Furthermore, the coordinated efforts by the government and BNM will continue to encourage healthy two-way flows in the domestic financial markets.
These ongoing efforts include the Qualified Resident Investor Programme, which offers resident corporates the flexibility to reinvest abroad, and proactive engagement with investors, exporters, and importers.
“BNM will also continue to ensure the orderly functioning of the domestic foreign exchange market,“ the central bank said.
Meanwhile, credit growth to the private non-financial sector moderated to 5.4% in the fourth quarter of 2025 from 6% in Q3, following slower expansion in outstanding loans (5%) and corporate bonds (6.9%).
Growth in business loans moderated to 3.9% from 5.5% in Q3, mainly reflecting slower loan growth for working capital purposes among SMEs (4.3%).
Business loan growth for investment-related purposes also eased, but remained above its long-term average.
On a quarterly basis, loan disbursements expanded across SMEs and non-SMEs (RM393.5 billion). For households, loan growth remained stable at 5.6%, with sustained loan growth across most purposes.
BNM said on the domestic front, household spending will benefit from the continued support from employment and wage growth, as well as government policy measures.
Investment activity will be driven by the further progress of multi-year projects in both the private and public sectors, with continued realisation of approved investments and implementation of catalytic initiatives under national master plans and the 13th Malaysia Plan.
On the external front, export growth will be underpinned by steady global demand, particularly for E&E goods.
The central bank said growth will also be supported by increased tourism activities following the launch of Visit Malaysia 2026.
Going forward, headline inflation is expected to remain moderate in 2026 amid the continued easing in global cost conditions.
The modest commodity price outlook would help to contain cost pressures on inflation. Core inflation is expected to remain broadly stable and near its long-term average in 2026, reflecting continued economic expansion and the absence of excessive demand pressures.
Furthermore, BNM said domestic policy reforms implemented in 2025, such as the Sales and Service Tax expansion and targeted RON95 subsidy rationalisation, are projected to have only modest effects on inflation in 2026.