Malaysia’s 4Q2024 gross domestic product (GDP) exceeded the advance estimate, bringing the full year 2024 GDP growth to 5.1%. The growth is within the official projection and MARC Ratings’ forecast. The continued expansion of the services sector underscores the resilience of private consumption, which remained a key growth driver, alongside strong external demand. Demand for electrical and electronic products continued to support Malaysia’s export performance, driven by the ongoing diversification of its trading partners.

In January, Malaysia recorded net foreign inflows into its bond market, as concerns over inflation eased due to expected retaliation on tariffs; this has further led to a dilution in the degree of tariffs by the US. Bond inflows exceeded equity outflows for the month, aligning with the ringgit’s appreciation from January to February and a weaker US dollar. Meanwhile, the 10-year US Treasury yields declined as lower-than-expected tariffs on China eased inflation concerns. Also, market fears of tariff retaliation and its potential expansion, raised the risk of weaker global demand and slower economic activity. While bond yields have trended lower, the decline is expected to be limited due to elevated US inflation and a strong labour market, which will also limit the decline of the Dollar Index.

Given the healthy US economic backdrop, US interest rates will remain elevated in the near term until the trade war causes more visible signs of dampened global trade and lower economic growth. Meanwhile, the eurozone is expecting another three rate cuts by the European Central Bank in 2025 amid ongoing disinflation and tepid growth.