Malaysia’s industrial production expanded at its quickest pace this year in July, signalling that the country’s economic base remains resilient despite global trade pressures and tariff challenges.
The Department of Statistics Malaysia reported that output increased 4.2% year-on-year, a result that exceeded market expectations and offered a boost to forecasts for the second half of 2025.
The figures underline why the central bank has held its policy stance steady, even as it seeks to balance growth with global uncertainties.
Manufacturing and mining drive July growth
The July surge was driven by a 4.4% rise in the manufacturing sector and a 4.3% rebound in mining activities. Export-oriented industries, particularly within manufacturing, helped lift overall production.
Chief Statistician Mohd Uzir Mahidin said the increase reflected stronger demand in key global markets, which supported the production base.
According to Bloomberg, the pace of growth in July was stronger than the 2.8% median estimate of economists surveyed, showing that Malaysia’s industrial sector performed beyond projections for the second consecutive month.
Central bank holds rates as growth stabilises
Bank Negara Malaysia (BNM) maintained its overnight policy rate last week, citing resilient consumption and a low inflation environment.
The decision followed the July move to cut rates by 25 basis points, the first reduction in five years. Governor Abdul Rasheed Ghaffour said the rate adjustment was intended to provide support for growth through the remainder of 2025 and into 2026.
By holding borrowing costs steady, the central bank signalled confidence in domestic demand while remaining cautious about external headwinds, including tariffs imposed by the US under President Donald Trump’s administration.
Cumulative growth slower in early 2025
Despite July’s strong showing, overall growth from January to July remained modest compared to last year. Industrial production rose 2.4% in the first seven months of 2025, lower than the 4% recorded during the same period in 2024.
The government’s official projection for GDP growth this year stands between 4% and 4.8%, a slowdown from 5.1% in 2024.
Authorities attributed the downward revision in part to the impact of US tariffs, which have added pressure to Malaysia’s export-driven economy.
Outlook for the remainder of 2025
While the July rebound strengthens confidence in the country’s industrial base, policymakers remain focused on balancing domestic resilience with global trade challenges.
The combination of stable interest rates, stronger manufacturing performance, and supportive consumption patterns offers Malaysia some insulation against external risks, though tariff headwinds remain a concern.
The Department of Statistics Malaysia has indicated that monitoring export trends and maintaining production efficiency will be key to sustaining momentum in the coming months.
With GDP growth still expected within the 4% to 4.8% range, the industrial sector’s ability to consistently outperform projections may determine whether Malaysia finishes the year at the upper end of its economic targets.
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