Malaysia’s full-year gross domestic product (GDP) growth is on track to reach the upper end of Bank Negara Malaysia’s (BNM) projection of 4.0%–4.8%, supported by stronger 3Q2025 GDP which expanded by 5.2% after two consecutive quarters of registering a 4.4% growth. Reflecting this acceleration, market consensus has revised its 2025 GDP growth forecast upwards to 4.7% from 4.2%. On a sectoral basis, services grew by 5.0% (2Q2025: 5.1%). Growth of the manufacturing sector strengthened to 4.1% (2Q2025: 3.7%), while that of mining rebounded sharply to 9.7% (2Q2025: -5.2%) on higher crude oil and natural gas output. Construction activity remained robust, recording double-digit growth of 11.8% (2Q2025: 12.1%). Household spending also proved resilient, with private consumption growing by 5.0% (2Q2025: 5.3%), underpinned by a healthy labour market. The unemployment rate held steady at 3.0% for two consecutive quarters, while real private-sector wages strengthened to 2.4% in 3Q2025 (2Q2025: 2.1%). MARC Ratings forecasts GDP growth at 4.5% for 2025, and 4.3% for 2026.

Export growth accelerated in October, extending September’s rebound, with total exports expanding 15.7% (Sep: 12.5%). Electrical and electronic (E&E) exports surged 26.5% (Sep: 19.5%), supported by strong global demand amid the semiconductor upcycle. According to the World Semiconductor Trade Statistics, global semiconductor demand is expected to persist into 2026, driven by demand for logic and memory chips. Meanwhile, inflationary pressures eased further. Headline inflation moderated to 1.3% in October (Sep: 1.5%), reflecting slower price increases across food and beverages (Oct: 1.5%; Sep: 2.1%) and housing and utilities (Oct: 1.1%; Sep: 1.5%), while transportation costs declined to –0.1% (Sep: 0.7%).

In October, foreign portfolio flows turned positive with net inflows of RM1.7 billion (Sep: -RM6.8 billion). Bond inflows recovered to RM4.4 billion (Sep: -RM6.8 billion), offsetting equity outflows of RM2.7 billion (Sep: RM0.0 billion). Foreign holdings of Malaysian Government Securities/ Government Investment Issues (MGS/GII) rose to 21.3% (Sep: 20.9%), supported by favourable prospects on the MGS–UST yield spread and improved external sentiment following the 47th ASEAN Summit. Looking ahead, a firmer external backdrop, moderating inflation expectations, and improving yield differentials — with markets pricing in a 77.1% probability of another 25 bps rate cut by the Federal Reserve (Fed) as of 24 November — are expected to sustain foreign demand for ringgit bonds.

As of month-to-date 20 November, MGS yields declined by 4–8 bps, led by the front end, with the 3 year yield easing by 8 bps. The downward shift was supported by subdued inflation expectations, favourable prospects on MGS–UST yield differentials, and an improving external trade environment, which bolstered investor confidence in Malaysia’s macroeconomic outlook following new trade developments announced at the 47th ASEAN Summit. Looking forward, MARC Ratings projects a continued decline in MGS yields, with the 10 year yield expected to anchor around the fair value of 3.35%–3.40% by end 2026 (Oct 2025: 3.50%). This trajectory is supported by steady investor demand for local bonds in the upcoming months, contained inflation expectations, and a stronger ringgit forecast of 3.93 USDMYR by mid 2026. Notably, as of year-to-date 20 November, the ringgit remains the best performing currency in Asia, appreciating by 7.7% against regional peers.