Malaysia’s Economy Stays Resilient as GDP Forecast Climbs to 4.8%

Malaysia’s economic momentum continued through October, prompting IPP Financial Advisers (IPPFA) to raise its 2025 GDP growth forecast from 4.5% to 4.8%. The upgrade reflects stronger-than-expected third-quarter performance and an improving external environment.  The IPP MY36 Thermometer (MET)—the IPPFA’s proprietary framework for tracking 36-month trends across 13 macro and financial indicators—recorded 82.75 in October, firmly in “strong” territory. The reading confirms that Malaysia continues to operate above its long-term average, supported by robust domestic demand, stable labour markets, and industrial momentum.

Key Drivers Behind the Upgrade
October brought two significant developments that strengthened Malaysia’s outlook:

Global monetary easing: The U.S. Federal Reserve delivered its second 25-basis-point rate cut in October, easing global liquidity pressures. The ringgit responded positively, strengthening to 4.188/USD, while the FBMKLCI reclaimed the 1,600 level.

Malaysia-U.S. trade agreement: During the ASEAN Summit in Kuala Lumpur, Malaysia signed the Agreement of Reciprocal Trade (ART) with the United States. The accord commits both nations to reciprocal market access, reduced non-tariff barriers, and greater trade transparency—immediately lifting investor sentiment.

Broad-Based Economic Strength
Nine of thirteen MET indicators remained above their 36-month averages in October:

• Industrial Production surged to a three-year high of 141.0, led by energy and mining output.
• Retail sales reached RM156.6 billion, reflecting firm household spending and tourism recovery.
• Inflation edged up to 1.5%, staying within Bank Negara’s comfort zone while supporting real wage growth.
• Gold prices advanced 4.7% to RM17,976 per ounce, indicating sustained safe-haven demand.

What This Means for Investors
While Malaysia’s economy remains strong with the MET above 80, the 10-point drop from August’s peak of 92.75 signals late-cycle moderation. Gold’s continued climb and manufacturing PMI readings below 50 suggest emerging caution in certain sectors. The FBMKLCI’s rebound above 1,600 demonstrates market resilience, though short-term pullbacks remain possible amid external risks. The MET’s 36-month trend shows cooling from peak conditions—consistent with late-cycle characteristics.

“The ART agreement marks a turning point in Malaysia-U.S. trade relations and reinforces investor confidence in Malaysia’s openness and competitiveness,” said Mohd Sedek Jantan, Investment Strategy and Country Economist at IPPFA. “Combined with the Fed’s policy easing, these developments have strengthened market sentiment and validated the outlook for sustained, broad-based resilience.”