Malaysia’s economy posted stronger-than-expected growth in the third quarter of 2025, with GDP expanding 5.2% year-on-year, up from 4.4% in Q2, according to Standard Chartered Global Research. Seasonally adjusted growth also improved to 2.4% quarter-on-quarter, underscoring the economy’s resilience despite a cautious global backdrop.
The bank attributes the pickup largely to a rebound in mining activity, which had previously been weighed down by planned maintenance. Mining contributed 0.5 percentage points (ppt) to Q3 growth after four quarters of dragging on overall performance.
Net exports also staged a notable turnaround, adding 0.7ppt to headline GDP after subtracting 2.6ppt in Q2. However, the improvement was driven mainly by a sharp 14.4% decline in intermediate goods imports, potentially signalling softer manufacturing momentum ahead. Capital goods imports remained firm, supporting a still-healthy investment climate. Total investment grew 7.4% in Q3, with structural investments continuing to hold up.
Given year-to-date growth of 4.7%, Standard Chartered has upgraded Malaysia’s 2025 GDP forecast to 4.7% from 4.2%. But with export front-loading expected to fade and global trade uncertainty lingering, the bank has revised its 2026 forecast down to 4.5% from 5.0%.
Despite moderating slightly, private consumption remained solid at 5% growth, supported by an all-time-high labour-force participation rate of 70.9%, record-low unemployment of 3%, and rising wages. The bank expects household spending to stay resilient, helped by higher civil servant wages and government cash assistance.
Bank Negara Malaysia is expected to keep the policy rate unchanged at 2.75%.
Malaysia’s current account swung back to strength in Q3, posting a MYR12 billion surplus (2.4% of GDP), near the long-term average. For the first time since 2011, the country recorded a services surplus, boosted by a surge in tourism. Travel receipts rose to 5.6% of GDP, and continued growth in visitor arrivals could add another 0.5ppt to the current account in 2025.
Semiconductor exports also supported a stronger goods balance, which widened to MYR33 billion from MYR17 billion. Meanwhile, infocomm services exports continued rising, a trend expected to accelerate as more data centres come online.
However, the primary income deficit widened to -3.9% of GDP due to higher investment outflows, though the repatriation of portfolio returns remained stable.
The financial account deficit widened to 2.2% of GDP in Q3, driven by non-residents selling domestic bonds. Foreign direct investment came in at 1.9% of GDP, lower than earlier quarters but not concerning given global uncertainties. Malaysian investors continued to increase their exposure to overseas equities, though at a slower pace than in Q2.
Overall, Standard Chartered sees Malaysia’s growth outlook as steady but evolving, with domestic demand and investment expected to carry the economy in the near term—even as external headwinds gradually intensify.