Malaysian ringgit's NEER appreciated by 3.8% against major trading partners in Q4 2025

• For 2025, the ringgit appreciated by 10.2% against the US dollar while the ringgit’s NEER appreciation was at 6.3%.
• The ringgit’s appreciation was driven by lower tariff-related uncertainties as the US concluded trade agreements with several of its trading partners in the region, including Malaysia.
• Growth in business loans moderated to 3.9%, reflecting slower loan growth for working capital purposes among SMEs.

The Malaysia ringgit's nominal effective exchange rate (NEER) appreciated by 3.8% against currencies of Malaysia’s major trading partners in Q4 2025, said Bank Negara Malaysia (BNM).

The currency also gained 3.9% against the US dollar during the quarter, supported by both external and domestic factors.

On the external front, the narrowing of interest rate differentials following the US Federal Reserve’s policy rate cuts in October and December supported the Malaysian ringgit in Q4 2025. In addition, the ringgit’s appreciation was driven by lower tariff-related uncertainties as the US concluded trade agreements with several of its trading partners in the region, including Malaysia.

Domestically, Malaysia’s positive economic prospects, underpinned by reform efforts, have continued to reinforce investor confidence and improved overall sentiment in domestic financial markets. In 2025, the ringgit appreciated by 10.2% against the US dollar while the ringgit’s NEER appreciation was at 6.3%.

Looking ahead, BNM anticipates that the ringgit will remain sensitive to external developments, particularly global market conditions. However, solid domestic fundamentals are expected to continue underpinning the currency. Policy coordination between the Government and BNM, alongside initiatives such as the Qualified Resident Investor programme and ongoing engagement with market participants, aims to support steady two-way capital flows and ensure orderly conditions in the foreign exchange market.

BNM also shared other economic and financial developments in Malaysia in Q4 2025, including: 

The Malaysian economy recorded a strong growth of 6.3% in the fourth quarter of 2025

The economy in Malaysia expanded 6.3% year-on-year Q4 2025, up from 5.4% in the previous quarter, with domestic demand doing much of the heavy lifting. Household spending picked up on the back of a healthier labour market conditions and income-related policy support, while investment remained firm, driven by higher spending on machinery and equipment — particularly for data centres — and the rollout of multi-year projects across both the public and private sectors.

In the external sector, exports also strengthened, led by electrical and electronics (E&E) goods, while tourism and ICT-related services helped lift services exports and maintain a current account surplus. Meanwhile, imports remained strong driven by the rebound in intermediate goods to support economic activity and productive capital-related goods reflecting the realisation of ongoing investment projects.

On the supply side, growth was anchored by services and manufacturing. Higher growth in the services sector was mainly driven by consumer-related subsectors, government services as well as ICT subsector following the operationalisation of data centres, while manufacturing benefitted from stronger E&E production amid higher demand from the global technology expansion. Agriculture also improved, supported by better palm oil output and fewer weather disruptions. On a seasonally adjusted quarter-on-quarter basis, the economy grew 0.8% (Q3 2025: 2.7%).

Headline and core inflation remained moderate in Q4 2025

Headline inflation remained stable at 1.3% (Q3 2025: 1.3%) while core inflation increased to 2.3% (Q3 2025: 2%). This was mainly driven by faster price increases in certain core items, such as jewellery and watches, and base effects from mobile communication services inflation.

The uptick was partly tempered by lower prices for several administered items, notably electricity and petrol, in line with larger discounts related to electricity generation costs during the quarter and the targeted RON95 fuel subsidy implemented beginning October 2025.

Price pressures also appeared less broad-based. The share of consumer price index (CPI) items recording monthly increases slipped to 39.6%, down from 43.8% in the previous quarter and below the historical fourth-quarter average.

For the full year, inflation remained contained, with headline and core inflation averaging 1.4% and 2% respectively, compared with 1.8% for both measures in 2024.

Credit growth moderated amid slower expansion in outstanding business loans

Credit growth to the private non-financial sector moderated to 5.4% in the fourth quarter of 2025 (Q3 2025: 6%) following slower expansion in outstanding loans (5%; Q3 2025: 5.6%) and corporate bonds (6.9%; 3Q 2025: 7.3%).

Growth in business loans moderated to 3.9% (Q3 2025: 5.5%), owing to slower loan growth for working capital purposes among SMEs (4.3%; Q3 2025: 6%). Business loan growth for investment-related purposes also eased but remained above its long-term average.

On a quarterly basis, loan disbursements expanded across SMEs and non-SMEs (RM393.5bn; Q3 2025: RM376.9bn). For households, loan growth remained stable at 5.6% (Q3 2025: 5.7%), with sustained loan growth across most purposes.

Looking ahead, BNM expects the growth momentum to carry into 2026 after the economy expanded 5.2% in 2025, outperforming earlier forecasts on the back of firm domestic demand and steady exports.

Governor Dato’ Sri Abdul Rasheed Ghaffour said household spending will benefit from the continued support from employment and wage growth, as well as Government policy measures, while investment will be sustained by the rollout ofmulti-year projects in both the private and public sectors, with continued realisation of approved investments and implementation of catalytic initiatives under national master plans and the 13th Malaysia Plan (13MP). Exports, particularly electrical and electronics goods, are projected to benefit from steady global demand, alongside a pickup in tourism tied to the Visit Malaysia 2026 campaign.

Inflation, meanwhile, is expected to remain moderate in 2026. Softer global costs and a modest commodity price outlook should help keep price pressures in check, with core inflation seen remaining close to its long-term trend. Recent policy changes, including tax adjustments and targeted fuel subsidies, are not expected to significantly disrupt the overall price environment.

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