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Market Highlights
Economic Update
Mon, 25 Aug 2025 06:53 am
Malaysia Inflation Rate - Policy measures to drive 2H25 inflation

Headline inflation edged up to +1.2% YoY in July 2025 (Jun: +1.1%), in line with consensus, while core inflation remained unchanged at +1.8% for the third straight month.    

July’s inflation reflected mixed policy effects. Insurance premiums rose as medical policy repricing was phased in under BNM’s staggered adjustment framework, while electricity bills declined on softer fuel costs.

SST pass-through remains limited, with only some items rising in July. Overall, it is expected to add c.15bps to 2H25 inflation.    

Inflation in 2H25 could be supported by the RM1,700 minimum wage extension to all employers from August, potential implementation of RON95 subsidy rationalisation, and US tariffs that may push up consumer goods prices.    

We maintain our 2025 inflation forecast of +1.9% YoY, though the muted July print and delays in RON95 subsidy rationalisation tilt risks to the downside.

With real interest rate still above the pre-pandemic average, BNM has room to ease should growth falters. Our base case is for OPR to remain at 2.75% through 2025. 

Economic Update
Wed, 20 Aug 2025 07:20 am
Malaysia External Trade: Modest growth ahead despite July surprise

Malaysia’s exports surprised on the upside, rising 6.8% YoY (Jun: -3.6%) against expectations of a contraction. Import growth softened to +0.6% (Jun: +1.3%), widening the trade surplus to a four-month high of RM15.0bn.

The rebound was led by manufactured goods (+9.0% YoY; Jun: -3.3%), particularly E&E. The stronger July print partly reflected higher frontloading ahead of tariffs, as evidenced by increased exports to transshipment hubs such as Singapore, which may prove short-lived.  

Data centre development should remain a near-term driver, sustaining capital imports and underpinning services exports. However, the 17.8% slump in intermediate imports reinforces our view that frontloading activities may have run its course.      

Looking ahead, we expect export growth to moderate through 2025 as reciprocal tariffs kicks in. Downside risks stem from the impending US semiconductor tariff, a potential slowdown in Chinese demand, and a stronger ringgit eroding Malaysia’s export competitiveness. 

Economic Update
Mon, 18 Aug 2025 07:28 am
Malaysia 2Q25 GDP: Growth remains steady at +4.4% YoY

• Malaysia’s GDP growth held steady at +4.4% YoY in 2Q25 (1Q25: +4.4%), slightly undershooting expectations as domestic strength was offset by slower external trade.

• The current account surplus narrowed sharply to 0.1% of GDP in 2Q25 (1Q25: 3.4%), mainly on a weaker goods surplus. We project the 2025 surplus to moderate to 1.3% of GDP (2024: 1.4%), as external conditions remain volatile.

• A key risk lies in sectoral tariffs on semiconductors, which could raise Malaysia’s effective tariff to c.35%, above BNM’s baseline assumptions underpinning its revised 2025 GDP growth range of 4.0–4.8%.     

• Our base case assumes a 100% tariff on semiconductors with half of Malaysia’s exports exempted, placing GDP growth at +4.0%, the lower bound of BNM’s forecast. Sensitivity analysis suggests that every additional 25-ppt increase in tariffs could shave off c.0.1 ppts from GDP growth.   

• While semiconductor tariffs could tilt BNM’s policy bias more dovish, we see no urgency for another policy rate cut. We expect OPR to remain at 2.75% through 2025.
 
• Looking ahead, we remain watchful for external risks, including a potential slowdown in China and the evolving tariff landscape. For now, we maintain our 2025 GDP growth forecast of +4.2%, with semiconductor tariff impacts yet to be incorporated into our baseline projections.

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