Malaysia’s economic growth is expected to slow in 2025 as escalating US trade tariffs weigh on exports, prompting two of Southeast Asia’s largest banks—United Overseas Bank Ltd (UOB) and Malayan Banking Bhd (Maybank)—to revise their GDP forecasts downward.
UOB cut its growth projection for Malaysia to 4.0% from 4.7%, while Maybank lowered its forecast to 4.3% from 4.9%. Both banks also flagged the possibility of a 25-basis-point rate cut by Bank Negara Malaysia later this year.
The 24% reciprocal tariff imposed by the US on Malaysian goods was anticipated by UOB economists Julia Goh and Loke Siew Ting, but the broader implications are more concerning. Additional US tariffs targeting major global trading partners such as China, the EU, and Japan are expected to dampen global trade flows—affecting Malaysia indirectly through its integrated supply chains.
“The risks of escalation and retaliation have increased, potentially curbing global trade, growth, and investments more than previously expected,” UOB said in a research note. However, they view the impact on domestic inflation as minimal, citing potential overcapacity and supply-driven factors.
Maybank, in a separate note, highlighted Malaysia’s vulnerability due to its high trade dependency—particularly in sectors like semiconductors, which may be targeted next by US tariffs. Analysts Chua Hak Bin and Suhaimi Ilias noted that Malaysia’s downgrade is among the most significant in the region, alongside Vietnam and Singapore.–BLOOMBERG
