GDP growth hits one-year high in Q3

Economic activity surprises markets to the upside once again: According to a preliminary reading, GDP growth edged up to 5.2% year on year in the third quarter, from 4.5% in the second quarter. The reading was better than markets had expected as a moderation in growth from the prior quarter had been forecasted.

Industry and services fuel momentum in Q3: Advance production estimates showed that the industrial sector spearheaded Q3’s improvement, while the services sector maintained its momentum from Q2. Compared with the prior quarter's data, figures in Q3 improved for industrial activity (+6.0% in annual terms vs +3.2% in Q2), while the reading for services activity remained stable (+5.1% in Q2 and Q3). Meanwhile, figures worsened for agricultural activity (+0.4% vs +2.1% in Q2). The industrial sector’s stronger performance was underpinned by accelerating manufacturing output and a rebound in mining, which more than offset a deceleration in construction activity. Meanwhile, the services sector held up thanks to resilient growth in domestic trade, hospitality, and transportation and storage.

Panelist insight: Nomura’s Euben Paracuelles and Yiru Chen commented on changes to their forecasts: “Taking into account the Q3 GDP advance estimate, we raise our full-year 2025 GDP growth forecast to 4.8% from 4.4% […]. Our forecast is now at the upper end of the official forecast range of 4.0-4.8% and pencils in only a modest slowdown to 5.0% y-o-y in Q4, reflecting some impact from the US tariffs. We expect domestic demand to remain resilient, with private consumption growth holding up, underpinned by fiscal support measures and resilient labour market conditions. In addition, we still expect investment spending growth to remain strong and decouple from export growth, owing to the government’s implementation of structural reforms and infrastructure projects, as reinforced by the 13th Malaysia Plan. The Johor-Singapore Special Economic Zone (JS-SEZ) will likely provide a further boost.”

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