Malaysia’s economy grows 4.5% in Q2 2025

Overall economic growth stood at 4.4% in the first half of the year, according to the Department of Statistics' latest review.

Malaysia’s economy expanded by 4.5% in the second quarter of 2025, driven by consistent sectoral performances and a resilient labour market.

According to the Department of Statistics Malaysia (DOSM)’s latest Malaysian Economic Statistics Review, Volume 7/2025, this Q2 growth was slightly up from 4.4% in Q1, underpinned by the services and manufacturing sectors, and further lifted by construction and agriculture.

While the mining & quarrying sector continued to decline, the overall quarter-on-quarter growth rebounded by 1%, recovering from a 3.5% contraction in the first quarter. This brings the first half of 2025’s economic growth to 4.4%.

Chief Statistician Dato’ Sri Dr. Mohd Uzir Mahidin said the results “reaffirm Malaysia’s resilience and its steady progress towards sustainable economic expansion,” despite external headwinds such as softening global growth and ongoing trade frictions.

Labour market sees stronger employment and lower joblessness

As of May 2025:

• Total employment rose 2.9% year-on-year to reach 16.86mn, up 0.3% month-on-month.
• The unemployment rate held at 3%, reflecting a 5.7% drop in unemployed persons year-on-year.
• The labour force expanded to 17.38mn, with the labour force participation rate inching up to 70.8% – a 0.2 percentage point increase from May 2024.

Sector-by-sector snapshot: Manufacturing, services, and construction remain pivotal

In May 2025, the manufacturing sector recorded sales of RM158.7bn, a 2.4% year-on-year increase led by a 13% surge in food, beverages & tobacco. Other contributors included electrical & electronics (+5.0%) and metal-related products (+3.7%).

In that vein, the Industrial Production Index (IPI) rose 0.3% year-on-year, with a modest recovery seen month-on-month (+1.1%) after April’s 8% slump.

The services sector also remained strong, with wholesale & retail trade hitting RM154.3bn in sales – up 4.4% year-on-year, supported by retail (+4.9%), wholesale (+4.7%), and motor vehicles (+1.2%). Notably, vehicle sales rebounded 7.9% month-on-month.

Trade cools but inflation eases

Malaysia’s trade performance showed signs of moderation in Q2 2025:

• Total trade in May 2025 rose 2.6% year-on-year. However, exports dipped 1.2% while imports rose 6.6%.
• June 2025 saw a 1.2% year-on-year decline in trade, with exports falling 3.5% and imports rising 1.2%.
• The trade surplus narrowed sharply to RM8.6bn – down 40.1% from a year ago.

On the consumer side, headline inflation eased to 1.2% in May, its lowest in over four years, further decelerating to 1.1% in June.

The slowdown was seen across key groups such as food & beverages, housing & utilities, and education. Producer prices, however, continued to decline, with the Producer Price Index falling 3.6% in May and 4.2% in June, driven by contractions in mining and manufacturing.

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