GDP growth cools but beats prior estimate in Q4

Q4 GDP growth revised upwards from flash estimate: A second estimate showed that GDP growth moderated to 5.0% year on year in the fourth quarter from 5.4% in the third quarter. That said, the figure was higher than the first estimate of 4.8%. Meanwhile, on a seasonally adjusted quarter-on-quarter basis, GDP contracted 1.1% in Q4, contrasting the previous quarter's 1.9% increase and marking the worst reading since Q3 2021. In 2024 as a whole, the economy expanded 5.1% year on year, up from 3.6% in 2023.

Public spending and fixed investment lose steam: On the domestic front, Q4’s deceleration in GDP growth stemmed from weaker rises in public spending and capital outlays: Government spending growth was the slowest since Q2 2024, expanding 3.3% (Q3: +4.9% yoy), and fixed investment growth moderated to 11.7% in Q4 from 15.3% in the prior quarter. More positively, private consumption growth picked up to 4.9% year-on-year in Q4 from 4.8% in Q3. On the external front, net trade contributed to overall growth, recovering from Q3’s negative result. Exports of goods and services increased 8.5% on an annual basis in the fourth quarter, which was below the third quarter's 11.8% expansion. In addition, growth in imports of goods and services slowed to 5.7% in Q4 (Q3: +13.5% yoy).

Robust GDP growth ahead but external risks loom: The economy is set to expand robustly in 2025 at roughly the ASEAN average, underpinned by resilient household spending. Nevertheless, GDP growth will fall short of the pre-pandemic 10-year average of 5.4%, coming close to the bottom of the official target range of 4.5–5.5%, as public spending, fixed investment and exports of goods and services all lose steam. Potential U.S. tariffs on Malaysia and its key trade partners, as well as broader trade uncertainty, pose a key downside risk to economic momentum.

Panelist insight: EIU analysts commented on the outlook: “We forecast GDP growth of 4.7% in 2025, supported by continued expansion in the construction and services sectors. The Johor-Singapore Special Economic Zone will provide tailwinds to the economy. We anticipate that initial projects will focus on sectors with lower infrastructure demands, such as the digital economy, financial services and business services, which can leverage existing capabilities in Johor and neighbouring Singapore.” Nomura’s Euben Paracuelles and Yiru Chen held a more optimistic view: “We revise down our 2025 GDP growth forecast to 5.4% from 5.7%, within the upper half of the official forecast range of 4.5-5.5%, after taking into account the final Q4 GDP growth outturn and increasing headwinds from global trade protectionism. Nonetheless, we continue to expect resilient investment-driven growth in 2025, supported by various structural improvements in supply-chain diversification and national reform initiatives, which we think is already supporting a pickup in FDI inflows.”

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