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Backed by services, manufacturing, and export performance, the 4.4% GDP growth offers cautious optimism for the months ahead.
Malaysia’s economy stayed resilient in early 2025, with Gross Domestic Product (GDP) expanding by 4.4% in the first quarter, according to the Department of Statistics Malaysia (DOSM). This was a slight decrease from the previous quarter’s 4.9% but still reflects steady progress amid a volatile global climate, including new tariffs in the United States that sparked a chain of retaliatory measures worldwide.
Despite these headwinds, Dato' Sri Dr. Mohd Uzir Mahidin, Chief Statistician Malaysia shared that the services sector continued to drive growth, followed by manufacturing and construction. On a monthly basis, the economy grew 3.5% in January and 3.6% in February, before accelerating to 6% in March.
Industrial activity shows mixed signals
Malaysia’s Industrial Production Index (IPI) grew by 3.2% year-on-year in March 2025, driven by stronger output in manufacturing (up 4%) and mining (up 1.9%). However, the electricity sector saw a 2.7% decline, which slightly offset the gains. Month-on-month, the IPI surged 9.3%, signalling a recovery in short-term activity.
For the first quarter overall, IPI growth slowed to 2.3% from 3.4% previously, though the manufacturing sector remained a key contributor with 4.2% growth.
Services sector continues to shine
The services sector, a cornerstone of the economy, generated RM630bn in revenue in Q1 2025, marking a 6.0% increase from the same quarter in 2024. The Services Volume Index also rose by 5.2% to reach 158.3 points. Quarter-on-quarter, both revenue and volume saw modest improvements of 0.3% and 0.5%.
Within this, the wholesale and retail trade, food and beverage, and accommodation segment stood out, pulling in RM475.7bn (up 5.3%) and seeing a 4.7% jump in Volume Index to 157.2 points.
Inflation eases, cost pressures soften
Malaysian consumers saw some relief as inflation eased to 1.4% in March 2025, a slight decrease from 1.5% in February. The deceleration was mainly attributed to slower price hikes in personal care (3.6%), restaurants and accommodation (2.9%) as well as housing (1.9%).
Across the quarter, inflation grew 1.5%, a small dip from 1.7% a year ago. On the supply side, the Producer Price Index (PPI) fell by 1.9% in March, dragged by a steep 15% drop in mining (-15%) and smaller declines in manufacturing (-1.8%) as well as electricity and gas supply. April continued this trend, with inflation holding at 1.4% and the PPI declining by 3.4%.
Trade surplus surges nearly 95%
March also brought good news on the trade front. Total trade rose 2.2% to RM249.9bn, fuelled by a 6.8% rise in export performance (RM137.3bn). Imports, however, dipped 2.8% to RM112.6bn, boosting the trade surplus by 94.4% year-on-year to RM24.7 bn.
For Q1 2025 overall, Malaysia’s total trade climbed 3.6%, with exports and imports growing 4.4% and 2.8%, respectively. The trade surplus expanded by 20.1% to RM41.0bn, reinforcing the country’s strong footing in regional trade networks.
Labour market shows continued strength
The labour market remained on solid ground. Total employment rose 3.0% year-on-year to 16.7mn, with the employment-to-population ratio ticking up to 68.6% from 68.2% in Q1 2024. Meanwhile, the unemployment rate declined to 3.1%, reflecting growing labour demand.
The number of jobs in the economic sector increased by 1.4% to 9.06mn, an increase from 8.94mn a year ago. This is another indicator of economic resilience.
Outlook: Moderate momentum ahead
Malaysia’s Leading Index (LI), which anticipates future trends, grew 0.6% year-on-year in March 2025 to 112.5 points. The increase was supported by strong growth in housing approvals (up 27.8%) and semiconductor imports (up 22.3%). While the index slipped slightly month-on-month, the broader signal points to stable conditions and moderate growth in the months ahead.
READ MORE: Malaysia’s business confidence remains optimistic in Q2 2025, despite mixed state-level sentiment
Lead image / DOSM
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