Reaccelerating Malaysia posts 5.2% GDP jump, signalling rising clout in Southeast Asia’s economic race

KUALA LUMPUR: In the third quarter of 2025 (Q3’25), Malaysia’s GDP grew 5.2% — a number economists say signals not just stability, but real forward momentum.

IPP Global Wealth country economist Mohd Sedek Jantan said the results match what officials had expected: strong local spending and better export performance, especially in the electrical and electronics sector.

According to Jantan, the deeper message is that the economy is gaining momentum, not just holding steady. He noted the encouraging 2.4% quarter-on-quarter growth, powered by stronger activity in services, manufacturing and mining.

One bright spot is Malaysia’s external position. Net exports have risen, and the current account has swung to a RM12.2 billion (S$3.83 billion) surplus — a sign that the country is adjusting well to a still-unpredictable global trade environment.

With unemployment low at 3%, wages rising 3.8%, and inflation staying mild at 1.3%, Mohd Sedek said Malaysia’s growth is becoming more homegrown and resilient. His team now expects 2026 GDP growth to be between 4.3% and 4.5%, driven by private spending and manufacturing.

He added that global trade tensions aren’t weighing heavily on Malaysia, thanks in part to the US-Malaysia Agreement on Reciprocal Trade (ART), which has helped reduce uncertainty.

Sectors are pulling their weight

Analysts at UOB Global Economics & Markets Research echoed the positive tone, saying Malaysia’s final Q3’25 numbers confirm a “robust” performance. Services and manufacturing continued to expand, mining and quarrying bounced back, and construction posted double-digit growth.

UOB said domestic demand has stayed strong, supported by confident household spending and steady investment. Better net exports and targeted government measures added an extra lift.

With the current account surplus widening sharply, UOB is keeping its 2025 growth forecast at 4.6% and expects 4.5% growth in 2026. The bank also expects the Overnight Policy Rate to stay at 2.75% next year, given firm growth and manageable inflation.

Local spending still the main engine

CIMB Treasury & Markets Research said Malaysia’s 5.2% Q3’25 growth landed exactly where they expected. Domestic demand stayed strong, and the mining sector rebounded sharply.

Private consumption climbed 5%, aided by stable job conditions, cash assistance under STR+SARA, and the rollout of the RM1,700 minimum wage in August 2025.

Exports grew 1.4%, thanks mainly to electrical and electronics products. The services sector grew 5%, manufacturing 4.1%, and mining 9.7%, helped by recovering gas and oil output.

Seasonally adjusted, GDP grew 2.4% from the previous quarter — an improvement over Q2’s 2.2%.

Looking to 2026: Steady, but still driven by spending

Geoffrey Williams, director of Williams Business Consultancy, believes growth of 4% to 4.5% in 2026 is realistic and aligns with Malaysia’s long-term potential. He thinks 2025 could finish slightly stronger at around 4.7%.

He also noted that wage increases remain modest, and STR-SARA payments are unchanged and limited to specific groups, which means their overall impact isn’t very large.

On Malaysia’s economic strategy, Williams said the country’s twin focus on tourism and data centres reflects a mix of low-tech and high-tech development.

Williams stressed that tourism will create more jobs and have a stronger community impact. Data centres, on the other hand, are highly tech-driven but don’t generate many jobs once construction wraps up.

Bottom line

Malaysia’s economy isn’t just recovering — it’s gaining traction. Stronger domestic demand, improving exports, and steady confidence from analysts suggest that 2025 and 2026 are shaping up to be years of solid, stable growth.