M'sian economy missing mark even before Trump tariff - report

Summary

• Bloomberg reports that Malaysia’s economy missed its Q1 growth target of 4.8pct, expanding only by 4.4pct.

• The slow growth is attributed to shrinking manufacturing, construction, and mining activity.

• Analysts project Bank Negara Malaysia may cut rates to boost growth.

Malaysia’s economy missed its growth target even before US President Donald Trump’s tariff announcement.

According to a report by Bloomberg today, Malaysia’s gross domestic product (GDP) rose 4.4 percent in the January-March period from a year earlier, according to advance estimates from Malaysia’s Statistics Department today.

The figure is below the 4.8 percent median estimate in a Bloomberg News survey, marking a third straight quarter of slower growth.

The disappointing data comes as policymakers review the official 4.5 percent to 5.5 percent growth forecast for 2025 on uncertainty over global trade.

Bloomberg attributed the drop to reduced activity in the manufacturing and construction sectors, alongside a 4.9 percent contraction in mining and quarry work.

However, the services sector expanded by 5.2 percent, maintaining overall economic stability amid global trade uncertainties, particularly related to US tariffs.

“Malaysia’s GDP growth held firm amid persistent global headwinds, underpinned by resilient domestic fundamentals,” chief statistician Uzir Mahidin was reported as saying.

Rate cuts?

With the slowdown, analysts are expecting that Bank Negara Malaysia (BNM) may cut rates to stimulate growth.

The regulator previously mentioned it would look beyond monetary policy to deal with the tariff fallout.

“BNM is likely to hold rates unless growth falls toward three percent in the second half of the year, which would increase the case for easing,” according to an April 14 report from Kenanga Investment Bank Bhd.

BNM last adjusted borrowing costs in May 2023, with a 25-basis-point hike.

Trade war

On April 3, Trump slapped tariffs on many countries, including Malaysia.

The Republican leader imposed a base tariff of 10 percent on all countries, with Malaysia getting slapped with a total 24 percent “reciprocal tariff”.

However, Trump later paused the reciprocal tariffs for 90 days but maintained the base tariff.

On April 11, Investment, Trade, and Industry Minister Zafrul Abdul Aziz told CNBC that Malaysia, as the Asean chair this year, has requested a special US-Asean summit to discuss the tariff issue.

He also confirmed that all Asean leaders agreed to go to the US to meet Trump during the summit.

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