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Latest statistics show Malaysia’s economy expanding strongly in late 2025, supported by domestic demand, manufacturing output, and steady trade performance, while employment and labour force participation continued to grow.
Malaysia’s economy ended 2025 on a steady note, supported by robust domestic demand, resilient industrial performance, and sustained external trade activity, according to the latest Malaysia Economic Statistics Review (MESR), Volume 2/2026 released by the Department of Statistics Malaysia (DOSM).
The report highlights economic developments in the fourth quarter of 2025, alongside key statistics released in December 2025 and selected updates for January 2026.
One notable feature in this edition is an article examining 'The age profile of mothers and its impact on fertility'. The study explores the rising age of mothers at first live birth and how it relates to Malaysia’s declining fertility rate. It also looks at how changing marriage patterns, higher educational attainment, increased female labour force participation, and economic considerations are shaping demographic trends and influencing long-term population dynamics.
Malaysia’s economy shows strong growth
Malaysia recorded strong economic growth towards the end of 2025. Gross Domestic Product (GDP) expanded by 6.3% in the fourth quarter of 2025, the fastest pace since the fourth quarter of 2022 and higher than the 5.4% recorded in the previous quarter.
According to Dato’ Sri Dr. Mohd Uzir Mahidin, Chief Statistician Malaysia the expansion was mainly driven by the services and manufacturing sectors on the supply side. On the demand side, private final consumption expenditure and gross fixed capital formation continued to support economic activity, reflecting resilient domestic spending and sustained investment growth.
The positive performance came amid a global environment that remains steady but moderate. The International Monetary Fund (IMF) reported global economic growth of 3.3% in 2025, with similar growth projected for 2026 and slightly moderating to 3.2% in 2027. Emerging market and developing economies are expected to remain resilient, growing above 4%.
Industrial and manufacturing activity remain resilient
Industrial production in Malaysia continued its upward trend. The Industrial Production Index (IPI) expanded 4.8% year-on-year in December 2025, marking two consecutive years of monthly growth.
The increase was mainly supported by manufacturing output, which rose 6.7%, and electricity production, which grew 3.7%. However, the mining sector recorded a decline of 2.5%. On a month-on-month basis, the IPI edged up 0.2% in December, rebounding after a 1.1% decline in November.
Manufacturing activity also remained strong throughout the year. Total manufacturing sales reached RM1.97tn in 2025, representing a 4.2% increase compared to 2024.
In December 2025, manufacturing sales stood at RM168.6bn, growing 6.4% year-on-year, largely driven by higher electrical and electronics (E&E) product sales, which expanded 12.6%.
For the fourth quarter of 2025, manufacturing sales rose 5.8% year-on-year to RM509.5bn, reflecting sustained industrial demand.
Services sector supported by consumer spending
Malaysia’s services sector continued to show resilience, supported by ongoing household and business spending.
Wholesale and retail trade sales reached RM163.7bn in December 2025, expanding 7.6% year-on-year. For the full year, total wholesale and retail trade sales climbed to RM1.87tn, representing 5.6% growth compared with 2024.
Retail trade sales increased 6.1% to RM811.5bn, while wholesale trade grew 5.8% to RM827.4bn. Sales of motor vehicles also rose 3.2% to RM226.1bn, reflecting stable commercial activity and sustained consumer market confidence.
Trade and investment flows strengthen
Malaysia’s external sector also showed improvement.
The current account balance (CAB) recorded a higher surplus of RM2bn in the fourth quarter of 2025, supported by a services account surplus of RM5bn and net exports of goods totalling RM23.6bn.
At the same time, foreign direct investment (FDI) saw a significant increase, with net inflows rising to RM27.8bn in the fourth quarter of 2025, compared with RM8.5bn in the previous quarter.
Meanwhile, direct investment abroad (DIA) amounted to RM2.8bn, mainly channelled into equity injections and reinvested earnings overseas.
Trade activity continued to expand in early 2026. In January 2026, Malaysia’s total trade grew 12.6% year-on-year to RM272.4bn.
Exports surged 19.6% to RM146.9bn, while imports increased 5.3% to RM125.5bn, resulting in a wider trade surplus of RM21.4bn. The growth was largely driven by exports of electrical and electronics products, as well as professional, scientific and controlling instruments and apparatus.
Inflation remains manageable
Inflation in Malaysia remained relatively stable at the start of 2026.
The Consumer Price Index (CPI) rose 1.6% year-on-year in January 2026, with the index reaching 135.7 points, compared with 133.6 points in January 2025.
The increase was mainly driven by higher prices in personal care, social protection, and miscellaneous goods and services, which rose 6.6%.
On a month-on-month basis, inflation increased modestly by 0.1%, indicating relatively stable short-term price movements.
From the production side, price pressures eased further. The producer price index (PPI) for local production declined 2.9% year-on-year in January 2026, extending the 2.7% contraction recorded in December 2025. The drop was mainly due to lower prices in the mining sector, which fell 11.7%.
Labour market remains stable
Malaysia’s labour market continued to show steady progress.
The labour force expanded 3.0% year-on-year to 17.62mn persons in the fourth quarter of 2025. Employment rose 3.3% to 17.10mn persons, while the labour force participation rate (LFPR) stood at 70.9%.
The number of unemployed persons declined 3.9%, bringing the unemployment rate down to 2.9%, compared with 3.0% in the previous quarter.
On the demand side, the total number of jobs in the economy increased 1.8% to 9.21mn, indicating continued employment expansion.
Growth outlook remains steady
Looking ahead, Malaysia’s economic outlook remains stable.
The leading index (LI) increased slightly by 0.1% year-on-year in December 2025, reaching 114.0 points. On a month-on-month basis, the index grew 0.5%, supported by increases in real money supply M1 and expected sales value in manufacturing.
While the index signals a moderating growth outlook, domestic economic activity continues to provide underlying support.
Overall, Malaysia’s economy ended 2025 with sustained resilience, driven by strong services and manufacturing performance, robust domestic demand, and steady investment inflows.
ALSO READ: Malaysia businesses remain positive despite dip in confidence in Q1 2026
Lead image / DOSM
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