Malaysia’s economy grows 4.4% in Q2 2025, driven by strong domestic demand

The economy held steady in the second quarter, supported by festive spending, robust investments, and a resilient labour market.

Malaysia’s economy expanded by 4.4% in the second quarter of 2025, matching the growth rate recorded in the first quarter. On a quarter-on-quarter seasonally adjusted basis, growth picked up to 2.1% from 0.7% in Q1, according to the Department of Statistics Malaysia (DOSM).

Monthly performance showed an upward trajectory, with growth at 4.4% in April, 3.3% in May, and an accelerated 5.5% in June. For the first half of the year, the economy grew by 4.4%, slightly lower than the 5.0% recorded in the same period last year.

Dato’ Sri Dr Mohd Uzir Mahidin, Chief Statistician noted that the quarter’s expansion was underpinned by steady performances in services, manufacturing and construction, alongside festive season spending, higher travel activity and new construction projects, particularly data centres. He added that a strong labour market, low unemployment, and targeted government support helped households sustain purchasing power, although global uncertainties and tariffs continued to weigh on external demand.

Sector performance at a glance

• Services: Expanded by 5.1% (Q1: 5.0%), boosted by wholesale & retail trade (4.3%), transportation & storage (8.6%), and food, beverage & accommodation (9.0%), reflecting strong tourist arrivals and freight demand.
  
• Manufacturing: Eased to 3.7% (Q1: 4.1%), with strength in food processing and construction-related products. Export-oriented industries eased, with weaker output in refined petroleum products.
  
• Construction: Continued increase at 12.1% (Q1: 14.2%), led by non-residential buildings (17.0%) as industrial, commercial and infrastructure projects gained pace.
  
• Agriculture: Rose 2.1% (Q1: 0.7%), driven by oil palm (5.3%) and stable livestock and other agriculture output. Both increased by 2.0% and 1.5% respectively.
• Mining & quarrying: Declined 5.2% (Q1: -2.7%) due to lower natural gas (-8.1%) and crude oil production (-1.6%) amid scheduled maintenance.

Domestic demand fuels growth

Private final consumption expenditure remained a key driver, expanding by 5.3%, higher than the 5.0% recorded in Q1. Spending was most notable in restaurants & hotels (14.3%), transport (9.4%), and food & non-alcoholic beverages (4.2%), mirroring strong travel and holiday-related activity.

Investment momentum also strengthened, with gross fixed capital formation (GFCF) climbing 12.1% from 9.7% in Q1. Growth was led by machinery & equipment (16.6%) particularly in information and communication technology, alongside expansion in structures (10.5%). Both public and private sectors contributed to this performance.

Government final consumption expenditure grew by 6.4%, up from 4.3% in the previous quarter, supported by higher expenditure on supplies and services.

On the external front, imports rose 6.6%, while exports slowed to 2.6%. This led to a sharp contraction in net exports (-72.6%), highlighting the continued pressure from global uncertainties.

Lead image / Department of Statistics Malaysia Infographic