KUALA LUMPUR (Reuters) – Malaysia must still pursue long-term structural reforms to achieve high-income status despite the near-term risks of a global trade war and an escalation of geopolitical tensions, the central bank said on Monday.
Bank Negara Malaysia maintained its 2025 growth forecast at 4.5% to 5.5% despite the external risks, saying in documents released along with its annual report for 2024 that domestic demand would anchor the economy.
“To navigate the increasingly complex economic environment and steer the economy towards high-income status, it is imperative to deepen our efforts for structural reforms,” BNM Governor Abdul Rasheed Ghaffour said in the foreword to the central bank’s 2024 economic and monetary review.
“Positive economic momentum from the past year provides us with firm footing to carry the momentum forward.”
The economy grew 5.1% in 2024 driven by strong domestic demand, record approved investments, and exports.
Exports were projected to rise 5.2% in 2025, moderating from a 5.7% expansion in 2024, the report showed.
Abdul Rasheed said Malaysia needed to deepen cooperation with existing trade partners, explore new markets and improve its competitiveness as rising protectionism has made the region vulnerable to shifts in global supply chains.
While the government’s moves to cut blanket subsidies for a widely used transport fuel and expand the scope of a sales and services tax this year are expected to result in short-term price increases, the effects on underlying inflation will be limited and temporary, Abdul Rasheed said.
The government plans record budget spending this year and is also boosting salaries for civil servants to help manage the impact of its reform drive.
Headline inflation is seen in a range of 2% to 3.5% in 2025, and core inflation at 1.5% to 2.5%. Both headline and core inflation came in at 1.8% in 2024.
The central bank will keep a close watch on global developments and potential spillovers of domestic reforms, while ensuring its monetary policy supports price stability and sustainable growth, Abdul Rasheed said.
BNM has held its key interest rate unchanged at 3.00% since May 2023. Economists polled by Reuters expect the rate to be unchanged through 2025.
The central bank said the ringgit currency would be influenced by any policy shifts in major economies. A narrowing of interest rate differentials between the U.S. and other economies would lend support to the currency.
(Reporting by Danial Azhar and Ashley Tang; Editing by John Mair)
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