Malaysia’s economy grew by 4.5% year-on-year in the second quarter of 2025, a slight acceleration from the 4.4% growth recorded in the first quarter, according to advance GDP estimates released by the Department of Statistics Malaysia (DOSM).
This steady growth momentum was supported by robust domestic demand despite ongoing global economic challenges and uncertainties, including trade tensions and tariff risks. Chief Statistician Datuk Seri Mohd Uzir Mahidin highlighted that domestic consumption remained the key driver, buoyed by factors such as public sector wage hikes, school holidays, and festive seasonal spending during Hari Raya Aidilfitri and Hari Raya Aidiladha. Household spending was further reinforced by a stable labour market, low unemployment, low inflation, and government cash assistance programs like Sumbangan Asas Rahmah and Sumbangan Tunai Rahmah.
Sectoral Performances
| Sector | Q2 2025 Growth (YoY) | Q1 2025 Growth (YoY) | Notes |
|---|---|---|---|
| Services | 5.3% | 5.0% | Main contributor; growth across all sub-sectors including wholesale & retail trade, transportation, and business services |
| Manufacturing | 3.8% | 4.1% | Slight moderation; supported by electrical/electronic products and food processing |
| Agriculture | 2.0% | 0.6% | Accelerated growth due to higher output in palm oil, livestock, and rubber |
| Construction | 11% | 14.2% | Growth softened but remained strong |
| Mining & Quarrying | -7.4% | -2.7% | Continued contraction mainly due to lower natural gas and crude oil production |
On a quarterly basis, Malaysia's economy reversed previous declines and expanded by 1.0% in Q2 2025, rebounding strongly from a 3.5% contraction in Q1.
Outlook and Challenges
Despite Malaysia’s positive GDP growth, the economy continues to face external headwinds from geopolitical risks and trade tensions, particularly related to the US tariff policies. These global challenges have affected export demand, with exports declining recently even as domestic factors supported overall growth.
The latest data may provide policymakers some room to maneuver as Malaysia reviews its 2025 growth forecast, previously set between 4.5% and 5.5%.
Malaysia's economy recorded a modest improvement in Q2 2025’s GDP growth to 4.5% YoY, driven largely by strong domestic consumption and a resilient services sector, while manufacturing and agriculture showed mixed results and mining continued to contract amidst challenging global conditions