A snapshot of Malaysia's economic performance in Q2 2025

Growth momentum was primarily supported by the services sector on the supply side, while on the demand side, private consumption and investment remained the key drivers.

Malaysia’s economy remained resilient in the second quarter of 2025, driven by strong services and manufacturing activity, while improving labour market conditions continued to support domestic demand, according to the Department of Statistics, Malaysia (DOSM).

In its latest Malaysian Economic Statistics Review (MESR), Volume 8/2025, DOSM reported that Malaysia’s gross domestic product (GDP) grew 4.4% year-on-year in Q2, maintaining the same pace as the previous quarter. On a seasonally adjusted basis, growth stood at 2.1%.

Looking at the first half of 2025 as a whole, the country's GDP expanded by 4.4%, moderating from 5.0% in the same period in 2024.

"Growth momentum was primarily supported by the services sector on the supply side, while on the demand side, private consumption and investment remained the key drivers, said Chief Statistician Malaysia, Dato’ Sri Dr. Mohd Uzir Mahidin.

"This reflects the resilience of domestic demand in cushioning against external headwinds and sustaining overall economic activity," he added.

Excerpts of the review are as follows:

Services sector and domestic demand

The services sector continued to expand, with sectoral revenue growing 5.7% year-on-year to RM641.4bn and the services volume index increasing 5.1% to 159.9 points. Wholesale & retail trade, food & beverage, and accommodation contributed the most, with revenue rising 4.9% to RM484.0bn. Growth was supported by strong domestic travel and international visitor arrivals.

Labour market strengthens

Malaysia’s labour market showed continued improvement in Q2 2025. Breaking the details down, the labour force rose 2.7% year-on-year to 17.37mn in the quarter, with a participation rate of 70.8%.

Meanwhile, employment increased 2.9% to 16.85mn, lifting the employment-to-population ratio to 68.7%; and finally, the unemployment rate fell to 3.0% as jobless numbers declined 4.4% to 520,900.

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External trade and investment

Malaysia’s total merchandise trade in Q2 expanded 6.1% year-on-year to RM749.2bn, with exports up 3.4% and imports rising 9.0%, narrowing the trade surplus to RM14.4bn, down 55.3% from Q2 2024. In July, total trade improved 3.8% to RM265.9bn, led by stronger exports (+6.8%), resulting in a RM15.0bn trade surplus – the highest in 2025.

The current account surplus fell to RM0.3bn from RM4.3bn a year earlier. Foreign direct investment (FDI) moderated to RM1.6bn from RM9.6bn, concentrated mainly in services, while direct investment abroad (DIA) registered a net inflow of RM0.6bn.

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Inflation and producer prices

Consumer inflation eased to 1.1% in June, down from 1.2% in May, with lower increases in restaurants & accommodation services (2.8%) and furnishings & household equipment (0.1%). The Producer Price Index for local production declined 4.2%, led by mining (-8.0%) and manufacturing (-4.3%), which DOSM said indicates ongoing cost adjustments in upstream industries.

Photo / DOSM