KUALA LUMPUR: The Malaysian economy beat expectations with 6.3% growth in the fourth quarter of 2025 on the back of positive labour market conditions and income-related policy support.
The 4Q economic print, the country’s highest quarterly growth in three years, came in above the official advance estimate of 5.7%. It was also better than 3Q’s growth, which was revised higher to 5.4%.
Over full-year 2025, the Malaysian economy grew 5.2%, above the previous year’s 5.1% expansion and exceeding the forecast range of 4-4.8%.
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According to Bank Negara governor Datuk Sri Abdul Rasheed Ghaffour, the growth momentum is expected to continue in 2026.
“On the domestic front, household spending will benefit from the continued support from employment and wage growth, as well as government policy measures.
“Investment activity will be driven by the further progress of multi-year projects in both the private and public sectors, with continued realisation of approved investments and implementation of catalytic initiatives under national master plans and the Thirteenth Malaysia Plan (13MP),” he said in a statement issued by the central bank.
He added that on the external front, export growth will be underpinned by steady global demand, particularly for electrical and electronic (E&E) goods. Growth will also be supported by increased tourism activities following the launch of Visit Malaysia Year 2026.
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Meanwhile, headline inflation in 4Q2025 was stable at 1.3% while core inflation rose to 2.3% from 2% in 3Q2025.
Bank Negara said the increase was owing to faster price increases in certain core items such as jewellery and watches, as well as base efects from mobile communication services inflation. However, it was largely offset by lower prices for selected administered items, particularly for electricity and petrol.
In line with expectations, headline and core inflation in 2025 averaged at 1.4% and 2%, respectively, as compared to 1.8% for both in 2024.
Bank Negara expects headline inflation to remains moderate in 2026 amid the continued easing in global cost conditions, while a modest commodity price outlook would help to contain cost pressures on inflation.
Core inflation is expected to remain broadly stable and close to its long-term average in 2026, reflecting continued expansion in economic activity and the absence of excessive demand pressures. The central bank said the Sales and Service Tax (SST) expansion and targeted RON95 subsidy rationalisation implemented in 2025 are expected to result in only modest effects on inflation in 2026.
In 2025, the ringgit appreciated 10.2% against the US dollar, while the ringgit’s nominal effective exchange rate (NEER) – which measures a currency against that of a basket of major trading partners – appreciated 6.3%.
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“Moving forward, movements in the ringgit will continue to be influenced by external factors. Nonetheless, resilient domestic fundamentals are expected to provide enduring support to the ringgit,” said Bank Negara.
