Malaysia’s economy shows resilience as strong capital imports driven by data centres offset weakening trade signals, though risks from tariffs, China slowdown, and Ringgit strength point to softer export momentum ahead.
Strong capital imports driven by data centres
Imports of capital goods surged +20.6% YoY in July (Jun: +20.2%), underscoring sustained investment momentum. Bank Negara Malaysia highlighted that increased equipment purchases for new data centres was a key driver, as several facilities ramped up production. Analysts expect the trend to continue, supporting both capital imports and future services exports.
Intermediate imports signal softer export pipeline
By contrast, intermediate imports fell sharply (-17.8% YoY; Jun: -0.9%), raising concerns over Malaysia’s export outlook. As a proxy for production flows and order pipelines, the slump suggests that frontloading activities may have peaked, setting the stage for weaker export momentum ahead.
Modest 2025 outlook, risks tilt downside
Despite July’s export strength, analysts see moderation through 2025 as frontloading wanes and reciprocal tariffs take effect. The impending US tariff on semiconductors looms as a risk, although the presence of multinational firms with US footprints may cushion the impact. Softer data from China further signals cooling global demand.
Ringgit strength erodes competitiveness
The Ringgit’s broad gains—including against the Vietnamese Dong (+9.4%), Indonesian Rupiah (+6.1%), US Dollar (+5.8%) and Chinese Yuan (+4.3%)—could weaken Malaysia’s export competitiveness, adding pressure to exporters.
Bright spots in tech and oil & gas
On the upside, the global technology upcycle and strong semiconductor demand should support electrical & electronics (E&E) exports, which account for about 40% of total shipments. Meanwhile, a recovery in oil and gas production is expected to provide additional support. Overall, exports are projected to grow +2.9% YoY in 2025 (2024: +5.8%), with GDP growth forecast at +4.2% (2024: +5.1%).
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