Malaysia Set to Become ASEAN’s Second-Fastest Growing Economy by 2025

KUALA LUMPUR: Malaysia is projected to be the second-fastest growing economy in the Association of Southeast Asian Nations (ASEAN) by 2025, following an upward revision of growth forecasts by various financial institutions. Notably, HSBC Global Investment Research has increased its GDP growth estimate for Malaysia from 4.2 percent to 5 percent for that year, according to local media reports.

The bank attributes this optimistic outlook to Malaysia’s proactive diplomatic engagement during the recent ASEAN summit held in Kuala Lumpur in October. The summit facilitated discussions among major trading partners, enhancing Malaysia’s position as a neutral facilitator in regional trade. HSBC remarked, “Sentiment wise, there continues to be a revival of optimism,” adding that the nation’s improved economic performance and reduced trade uncertainties contributed to this forecast adjustment.

Strong Economic Indicators Support Growth

HSBC’s revised forecast aligns Malaysia closely with Indonesia, which is also projected to experience robust growth, while Vietnam takes the lead with an adjusted forecast of 7.9 percent for 2025. Earlier, on October 28, 2023, HSBC had raised Vietnam’s GDP growth forecast from 6.6 percent. Additionally, the bank notes that Malaysia’s reciprocal trade agreement with the United States may further bolster its economic prospects by minimizing trade uncertainties.

Tourism plays a significant role in Malaysia’s recovery, with visitor numbers returning to pre-pandemic levels. The country has emerged as a leader in attracting Chinese tourists, surpassing 20 percent of its 2019 levels, thanks to a visa-free scheme and increased flight connectivity. HSBC anticipates that the upcoming “Visit Malaysia 2026” campaign will further enhance this sector.

Other financial institutions have echoed HSBC’s positive sentiment. Maybank Investment Bank has revised its 2025 GDP growth forecast from 4.2 percent to 4.7 percent, while also increasing its 2026 outlook to 4.5 percent from 4.1 percent. Standard Chartered Global Research has similarly adjusted its 2025 estimate to 4.7 percent, reflecting Malaysia’s impressive 4.7 percent GDP expansion in the first nine months of this year.

Domestic Resilience and Currency Strength

According to a recent report from Bank Negara Malaysia, the country’s central bank, the economy expanded at its fastest pace in the third quarter of 2023, with GDP growing 5.2 percent from July to September. The Malaysian ringgit has also shown significant strength, reaching a four-year high of RM4.16 against the US dollar on November 11, 2023. Prime Minister Anwar Ibrahim hailed it as the “best-performing currency in Asia” after it had previously dipped to a low of RM4.79 in February 2024.

Economic forecasts suggest that the ringgit will stabilize at around RM4.16 against the US dollar by the end of 2025, with further strengthening anticipated, according to OCBC’s senior ASEAN economist Lavanya Venkateswaran. This positive trend indicates a resilient domestic economy, even as external demand fluctuates.

Overall, the combination of strategic trade agreements, a recovering tourism sector, and strong domestic demand positions Malaysia favorably within the ASEAN region, paving the way for continued growth in the coming years.