Chapter 2: Policy and Outlook in 2025

On the supply side, most sectors are projected to expand in 2025. The services and manufacturing sectors will again be the key drivers to overall growth.

The services sector is expected to register a higher growth of 5.7% in 2025 (2024: 5.4%), with continued expansion across all subsectors. The transport and storage subsector will be driven by continued support from air passenger traffic, launching of new and upgraded highways, operationalisation of LRT 3 and steady growth in logistics and storage activities. Growth in the finance subsector will be underpinned by sustained loan demand. The real estate and business services subsector will benefit from strong growth in construction activities. Consumer-related subsectors are also expected to lift services growth, driven by higher household spending amid improving income supported by policy measures. These policy measures include the implementation of a higher minimum wage and salary increment for civil servants under the SSPA. Additionally, tourism-related sectors will continue to benefit from incoming tourists with the more intensive promotion activities leading up to Visit Malaysia Year 2026. The higher emoluments for civil servants under the SSPA will also support government services.

The manufacturing sector growth is expected to moderate slightly to 3.9% (2024: 4.2%), as the continued expansion of the E&E and consumer-related industries are offset by slower growth in primary and construction-related industries. Primary-related industry is expected to be affected by lower natural gas output and scheduled upstream maintenance. As key infrastructure projects are near completion, construction-related manufacturing growth is also expected to record a moderation. Nevertheless, the E&E industry is set to benefit from the broader spillovers of the global tech upcycle, which is expected to record growth across all semiconductor segments. This is underpinned by the continued growth in global sales outlook, driven by external demand for consumer electronics and AI-related semiconductors. Consumer-related industries will gain support from continued household spending and the launch of domestic electric vehicle models.

The agriculture sector is projected to expand by 2.2% (2024: 3.1 %). Production of food crops such as rice, fruits and vegetables are expected to improve amid better weather conditions. Meanwhile, crude palm oil production is expected to continue to expand but at a more moderate pace as further productivity gains from better trained workers and improved fertiliser application will be offset by limited growth in mature hectarage. Growth in the livestock subsector will be sustained due to stable demand conditions and ongoing technological enhancements to the sector’s production processes.

The mining sector is estimated to contract by 0.8% (2024: 0.9%), due to planned maintenance at key oil and gas facilities. In addition, production declines in maturing fields will continue to weigh on oil production. These factors will more than offset the support from the commencement of new fields in 2024 such as Jerun and Kasawari in Sarawak, as well as ongoing expansions and enhanced recovery measures in some existing fields.

The construction sector is expected to continue to record high growth, albeit at a more moderate pace than in 2024 (11%, 2024: 17.5%). Growth will be driven by continued activities in non-residential, special trade and residential subsectors. In the non-residential subsector, growth is expected to remain robust. This will be underpinned by projects in both the industrial and commercial property segments. The special trade subsector will be supported by the implementation of small-scale projects announced under the Budget 2025 and end-stage works from large infrastructure projects that are nearing completion. The residential subsector will benefit from new housing projects, particularly in the affordable housing segment. Government incentives such as the personal tax relief for first-time homebuyers are expected to stimulate housing demand. However, the near-completion of infrastructure projects such as LRT 3 and Johor Bahru–Singapore Rapid Transit System (RTS) Link will result in a moderate growth in the civil engineering subsector.