KUALA LUMPUR, July 10 (Xinhua) -- Economists have lowered Malaysia's gross domestic product (GDP) growth forecast after the U.S. imposed 25 percent tariffs on goods.
OCBC Bank said in a recent note that it had lowered Malaysia's GDP growth forecast for 2025 to 3.9 percent year-on-year from 4.3 percent, and to 3.8 percent from 4.3 percent for 2026.
"Specifically, for the second half, this implies a sharper deceleration in GDP growth to 3.6 percent year-on-year from 4.3 percent in the first half," said the research house, adding that the hit to growth is more significant for Malaysia compared to regional peers.
"All exports to the U.S., which are primarily electronics and electrical appliances, are now exposed to tariff risks. The U.S. is also one of Malaysia's largest trading partners, accounting for 13.2 percent of total export share in 2024, exacerbating the downside risks to growth," it said.
It added that, as an open economy reliant on export growth, the drag from exports will weigh on domestic demand, particularly investment spending and household consumption.
The mounting external risks, particularly due to lingering U.S. tariff concerns, have also prompted RHB Investment Bank's recent downgrade of Malaysia's 2025 GDP forecast to 4.2 percent from 4.5 percent.
RHB also took into account Malaysia's first quarter GDP growth of 4.4 percent, which came in below its 4.8 percent forecast, partly due to weakness in the mining sector.
"Despite these external headwinds, domestic demand remains resilient, supported by robust consumer spending and steady investment," it said.
It also noted that sectors such as retail, construction, healthcare, education, and utilities, largely driven by local demand, remain relatively insulated from global disruptions.
Hong Leong Investment Bank Research also said on Tuesday that Malaysia's overall trade exposure to the U.S. is estimated at approximately 7.2 percent of GDP.
"With the introduction of a 25 percent tariff, and assuming a demand elasticity ranging between 0.7 and 2.0, the potential drag on GDP could be between 0.5 to 1.5 percentage points," the research house noted.
However, it added that given the limited timeframe for the implementation of new tariffs, elasticity may be dampened due to fewer available substitutes, which could moderate the initial impact. ■