Summary 

• Global growth is expected to moderate in 2H2025, as trade tensions and geopolitical uncertainties weigh on sentiment. The reintroduction of broad-based US tariffs has reignited protectionist risks, creating headwinds globally.
• MARC Ratings forecasts Malaysia’s economy to grow by 4.4% in 2025, down from 5.1% in 2024, supported by strong private consumption, robust tourism activity, and continued investment in manufacturing and public infrastructure. However, lingering external uncertainties prompted Bank Negara Malaysia (BNM) to cut the Overnight Policy Rate (OPR) to 2.75% in July, from 3.00% previously.
• MARC Ratings projects Malaysia’s headline inflation to average 2.3% in 2025 (previous MARC Ratings forecast: 2.6%), with the impact from fuel subsidy rationalisation and the Sales and Services Tax (SST) scope expansion offset by lower fuel prices and mild cost pass-through.
• Malaysia’s steady monetary stance, alongside expected rate cuts by the US Federal Reserve (Fed), is set to support further ringgit appreciation and foreign inflows in 2H2025. MARC Ratings forecasts the ringgit to remain robust, at RM4.25/USD by year end.
• Foreign demand for Malaysian government bonds remains strong, raising foreign holdings to 22.4% in May. We expect a dovish global policy backdrop and stable domestic conditions to maintain low bond yields. We expect the 10-year MGS yield to anchor around 3.50% by year end.