Bank Negara Malaysia Lowers 2025 GDP Forecast to 4.0-4.8% Amid Global Trade Tensions, Geopolitical Risks

Bank Negara Malaysia has revised its 2025 GDP growth forecast to a range of 4.0%-4.8%, down from the previously projected 4.5%-5.5%, citing escalating global trade tensions and geopolitical risks as primary factors. The central bank attributed the adjustment to prolonged elevated tariffs, particularly under former U.S. President Donald Trump’s policies, and the potential for less favorable trade agreements. Governor Datuk Seri Abdul Rasheed Ghaffour emphasized that Malaysia’s economy has shown resilience through structural reforms but warned that global uncertainties could still undermine growth. The revised outlook reflects a cautious stance, balancing fiscal prudence with the need to maintain competitiveness in a volatile environment [1].

The central bank also adjusted its 2025 inflation forecast to 1.5%-2.3%, a narrowing from the previous 2.0%-3.5% range. This change follows limited inflationary pressure from commodity prices and controlled domestic policy measures, which have helped stabilize costs. However, the bank acknowledged that both downside and upside risks remain contingent on the evolution of global trade relations and policy responses. Factors such as improved diplomatic ties, pro-growth policies in major economies, and strong electronics demand could counterbalance external pressures. Conversely, prolonged trade conflicts or geopolitical shocks could amplify risks, especially for export-dependent sectors [1].

An independent analyst forecast from ASEAN Research Unit Amro aligns with the central bank’s concerns, cutting Malaysia’s 2025 GDP growth projection to 4.2%. This adjustment was attributed to the impact of U.S. tariffs and a broader global economic slowdown. While Bank Negara did not explicitly reference Amro’s estimate, the broader context of trade-related risks supports the central bank’s revised guidance. If realized, the 4.2% growth rate would mark a significant deceleration from recent trends and test Malaysia’s economic recovery [2].

The central bank’s updated stance highlights the interconnectedness of Malaysia’s economy with global markets, particularly in trade and commodity flows. Structural reforms remain a key focus, with the bank emphasizing the need for long-term competitiveness. However, the reliance on external factors such as tariff negotiations and geopolitical developments underscores vulnerabilities. Governor Ghaffour noted that the economy’s moderate inflation and sustained activity provide a supportive environment for reforms, but external shocks could disrupt this trajectory.

The revised guidance also signals a strategic shift in monetary policy, balancing inflation expectations with growth support. By narrowing the inflation target range, the central bank aims to align with domestic cost pressures while retaining flexibility for accommodative measures if necessary. This approach mirrors global efforts to manage post-pandemic inflation without stifling growth through overly restrictive policies [1].

Analysts suggest that the downgrade underscores Malaysia’s exposure to global trade dynamics, particularly in sectors like electronics and fintech. While direct impacts on cryptocurrency markets remain unspecified, indirect effects through supply chain disruptions could materialize. The central bank’s emphasis on structural reforms and policy continuity reflects a long-term strategy to insulate the economy from external shocks. However, the success of these efforts will hinge on the resolution of trade tensions and the effectiveness of domestic measures in addressing structural challenges.

Bank Negara’s updated forecasts underscore the delicate balancing act between navigating immediate risks and fostering sustainable growth. With global trade tensions persisting, Malaysia’s economic trajectory remains contingent on external developments and the resilience of its structural reforms.

Source:

[1] [Malaysia Central Bank Cuts 2025 Growth, Inflation Forecasts Amid Global Risks](https://www.morningstar.com/news/dow-jones/20250728125/malaysia-central-bank-cuts-2025-growth-inflation-forecasts-amid-global-risks)

[2] [Asean Research Unit Amro Cuts Malaysia's 2025 GDP Growth Forecast to 4.2% on US Tariff Impact, Global Slowdown](https://klse.i3investor.com/web/headline/blog?type=all)