Malaysia, under the leadership of Prime Minister Anwar Ibrahim, who holds the position of finance minister, is recalibrating its economic growth expectations amid external pressures. To do so, the country recently released its strategy to raise its national growth forecast. This decision follows a weaker-than-expected growth in the first quarter of this year.
The administration has lowered its official 2025 growth target from 4.5% to 5.5% to as low as 3%. Currently, U.S. tariffs are taking a huge toll on the Malaysian economy. Amir Hamzah Azizan, a key economic advisor, stated, “What’s transpired over the past three weeks has been probably a lot harder than what people anticipated.” This recognition underscores the difficulty of the work ahead for Malaysia as it seeks to adapt to a rapidly shifting global economic order.
As the current chair of ASEAN, Malaysia should be willing and able to lead. FIA will continue to coordinate regional responses to the US tariffs affecting Southeast Asia. The nation has expressed an interest in cooperating with the US on reducing non-tariff barriers, as well as potentially negotiating bilateral trade agreements. Malaysia has shown great willingness to be part of these discussions. Second, they want to reduce their bilateral trade deficit with the United States.
Recognizing that external economic pressures will almost certainly impact growth, Malaysia is using its fiscal capacity to stave off that negative impact. The national government wants to increase direct investments by state-owned enterprises. Concurrently, it hopes to reduce the budget deficit, bringing it down from 4.1% in 2024 to a targeted 3.8% of gross domestic product this year. This countercyclical fiscal stance is a clear sign of Malaysia’s willingness to face the blows to growth that may come.
Recent negations with US officials were instrumental in walking back a threatening 24% “reciprocal” tariff that was set to go into effect. This result contributes to stopping future exacerbation of Malaysia’s economic circumstances. Amir Hamzah Azizan made clear the need for open dialogue moving forward in such discussions. He challenged, “Let’s just put everything on the table and say what’s fair or what’s not fair.” This strong sentiment mirrors Malaysia’s desire to achieve the right trade deal that will truly benefit both countries and broaden our relationship.
Meanwhile, Malaysia is expected to come out with a recalibrated economic outlook in the next few months. This report will provide an essential window into how tariffs and other outside forces are impacting the country’s long-term economic path. Malaysia is meeting these challenges straight on. It is committed to fostering a positive and fair trade partnership with the US while ensuring the ongoing health of its economy.
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