KUALA LUMPUR, July 14 — CIMB Investment Bank Bhd anticipates a moderate 4.3 per cent year-on-year (y-o-y) growth, as expectations of higher tariffs set in and a softer Industrial Production Index (IPI) point to a potential slowdown in the second quarter of 2025 (2Q 2025).
In a note, the investment bank said its base case assumes that the current 10 per cent tariff on Malaysia’s exports to the United States (US) will remain in place until end-2025.
Nevertheless, recent developments suggest that a 25 per cent US tariff, effective August 1, is plausible, depending on the outcome of ongoing US-Malaysia trade negotiations.
“Should the 25 per cent rate be implemented, we expect a temporary spike in front-loading export activity as exporters rush to beat the tariff deadline,” it said.
Hence, beyond August 2025, trading activity is likely to soften, resulting in a weaker external environment, CIMB Investment Bank said.
Consequently, Malaysia’s gross domestic product (GDP) growth could fall below its 4.3 per cent baseline projection, with downside risks stemming from weaker export momentum and potential spillovers into domestic investment and business sentiment.
Bank Negara Malaysia (BNM) has cut the overnight policy rate (OPR) to 2.75 pr cent on July 9 amid prolonged trade uncertainty and a deteriorating economic outlook, while emphasising that any further adjustments will be guided by incoming data, it said.
CIMB Investment Bank also noted that with the weaker May performance, the combined IPI growth for April-May slowed to 1.5 per cent y-o-y, a deterioration from the 1Q 2025 growth of 2.3 per cent y-o-y, indicating a loss of momentum in industrial activity.
“Nevertheless, the continued front-loading of the manufacturing exports, expected to continue into early 3Q 2025, driven by the US tariff deadline extension to August 1 from July 9, will help cushion the impact of declining mining output,” it said.
The upcoming release of the May distributive trade index on July 14 will offer a clearer picture of 2Q 2025 economic activity ahead of the advance GDP estimate.
The Statistics Department Malaysia is scheduled to announce the advance GDP estimates for 2Q 2025 on July 18.
