Malaysia defies global trade tensions with solid growth, says IMF

The International Monetary Fund’s mission chief for Malaysia, Masahiro Nozaki, says the nation’s strong performance partly reflects sound economic policies.

Masahiro Nozaki said IMF welcomes the plan to reduce the fiscal deficit further to 3.5% of gross domestic product in 2026 and to 3% of GDP by 2028. (Envato Elements pic)

PETALING JAYA:

 Malaysia has shown notable resilience against global trade tensions and policy uncertainty with its economy growing at a healthy pace this year, supported by strong domestic consumption and investment, solid employment growth, and a global tech-sector upcycle, says the International Monetary Fund (IMF).

IMF’s mission chief for Malaysia, Masahiro Nozaki, said this strong performance partly reflects the nation’s sound economic policies, adding that the authorities “have maintained prudent macroeconomic and financial policies”.

He said that while the recent Malaysia-US trade deal has helped reduce uncertainty for businesses and consumers in Malaysia, the global landscape has shifted, with global uncertainty becoming a new normal.

“Against this backdrop, rebuilding Malaysia’s macroeconomic buffers remains critical.

“Malaysia’s economic resilience is expected to continue in the near-term, supported by strong domestic demand. IMF staff projects growth will slow marginally from 4.6% in 2025 to 4.3% in 2026, mainly reflecting the impact of higher US tariffs on Malaysia,” Bernama reported him as saying today.

Nozaki said IMF welcomes the authorities’ plan to reduce the fiscal deficit further to 3.5% of gross domestic product in 2026 and to 3% of GDP by 2028.

“Continuing to rebuild fiscal buffers through further high-quality and sustainable revenue and expenditure measures remains critical, as federal government debt, standing at 64.6% of GDP at end-2024, is still above pre-pandemic levels.

“IMF welcomes ongoing efforts to strengthen fiscal transparency and spending efficiency, including the passage of the new Government Procurement Act. Inflation, averaging 1.4% during January-October 2025, is projected to remain stable and gradually return to its long-term average of 2%.”

Nozaki said continued vigilance is important against pockets of vulnerabilities, such as highly leveraged households, banks’ exposure to firms affected by the US tariffs and the linkage between banks and non-bank financial institutions.

“Banks’ external funding risks remain contained and mitigated by their holding of ample foreign currency assets, though continued monitoring is warranted given elevated global financial market risks,” he said.

He said swift implementation of structural reforms under the 13th Malaysia Plan is key for further domestic-driven and inclusive growth.

“Labour market reforms aimed at increasing private sector wages, reducing skill-related underemployment and raising female labour force participation can help achieve the ambitious development goals under the 13MP,” he said. - FMT