Chapter 2: Policy and Outlook in 2025

In 2025, Malaysia’s economy is expected to be supported by the steady growth of domestic demand and moderate expansion in exports. Further improvements in labour market conditions and income-related government policy measures will provide support to household spending. Investment activity would be sustained by existing and new multiyear projects across key economic sectors on the back of the strong investment approvals as well as implementation of catalytic projects under the national master plans. Amid uncertain global trade environment, the external sector is expected to register more moderate growth, driven by continued growth in the electrical and electronic (E&E) sectors and further increase in tourism activity.

Private consumption is expected to grow by 5.6% in 2025 (2024: 5.1%) driven by the continued improvement in labour market conditions and higher income growth. Employment is projected to expand by 2.1% (2024: 2.6%) with total employment projected at 17 million persons (2024: 16.6 million). The unemployment rate is estimated to decline to 3.1%. Income growth is projected to improve supported by higher labour utilisation and government policy measures, including the implementation of a higher minimum wage and civil servant salary under the Public Service Remuneration System (Sistem Saraan Perkhidmatan Awam, SSPA).

Gross fixed capital formation (GFCF) is expected to grow by 9.3% (2024: 12%). The strong growth is driven by the continued robust investments in both structures as well as machinery and equipment (M&E).

Private investment growth is expected to remain strong at 10.1% (2024: 12.3%). This is underpinned by the global technology upcycle and sustained external and domestic demand conditions. The realisation of new and ongoing investments is progressing well, with 84.5% of manufacturing projects approved since 2021 in various phases of implementation. In addition, construction activities are expected to record high growth, as reflected in the increased value of early-stage construction work done (2024: RM33.9 billion; 2023: RM31.5 billion). Moving forward, high investment approvals in 2024 reaching RM378.5 billion (2023: RM329.5 billion) signal strong investment intentions.

Notably, the quality of investments has improved amid the shift towards higher value-added subsectors including E&E and information and communication technology (ICT), as well as emerging industries such as green technology.

Public investment is projected to grow by 6.4% (2024: 11.1%) driven by higher capital expenditure by public corporations. Transportation and utilities-related industries are expected to drive investments amid the expansion of railway and public transportation systems. In addition, higher demand for electricity is poised to support electricity grid network enhancement and energy transition projects. Continued progress of existing projects and rollout of new infrastructure investment such as Pan Borneo Highway Sabah Phase 1B, Mutiara Light Rail Transit (LRT) line and expansion of airports will also continue to support growth into 2025.

Public consumption is estimated to expand by 4.9% (2024: 4.7%). Growth will be supported mainly by the Government’s higher emoluments amid salary increment for civil servants under the SSPA.