KUALA LUMPUR: United Overseas Bank (UOB) forecasts Malaysia's economy to grow 4.7 per cent for 2025, reflecting normalisation from a high base effect, strong trade diversification and supportive domestic drivers.

UOB senior economist (Malaysia) Julia Goh said Malaysia continues to have strong domestic levers supported by its stable labour market conditions, ongoing investments, energy transition efforts, implementation of national masterplans and regional development despite higher external risks.

"With a total expenditure budget of RM421 billion or 20.2 per cent of gross domestic product (GDP) for next year, the fiscal engine remains expansionary despite a narrower fiscal deficit target of 3.8 per cent of GDP.

"Potential investments in the pipeline include RM25 billion by government linked-investment companies (GLICs) alongside several public-private partnership projects, and more than RM40 billion worth of government construction projects to commence in 2025," she said at UOB Global Economics and Market Research's 2025 Macroeconomic Outlook virtual media briefing today. 

Ringgit outlook

Goh said that despite sound economic and financial fundamentals, the ringgit is vulnerable to external developments, especially the potential upcoming Trump tariffs which is expected to weigh on Asian foreign exchange.

"The ringgit which is closely correlated to the yuan will likely take direction from the latter. There should be more efforts to encourage more consistent inflows by government linked companies (GLCs) and Malaysian corporates," she said.

She also expected the Qualified Resident Investor programme to offer flexibility for resident corporates to reinvest abroad after repatriation of foreign funds, and the liberalisation of foreign exchange policies for multilateral development banks and non-resident development financial institutions to issue ringgit-denominated debt securities for use in Malaysia and provide ringgit financing to resident entities.