Malaysia’s economy grew 5.2% last year, anchored by robust domestic demand and strong investment activity, according to Bank Negara Malaysia’s (BNM) recently published Annual Report 2025, Economic and Monetary Review 2025, and Financial Stability Review for the second half of 2025.
“Stable domestic economic, monetary and financial conditions have helped cushion the impact of external shocks and paved the way for important reforms to take place,” said BNM Governor Dato’ Sri Abdul Rasheed Ghaffour.
Household spending remained firm, supported by a positive labour market and targeted policy measures, while investment surged on the back of multi-year projects and approvals, particularly in manufacturing, high-technology services, and advanced E&E sectors. Inbound tourism, aligned with Visit Malaysia Year 2026, is also expected to support external sector growth.
Headline inflation averaged 1.4% in 2025, the lowest in five years, though BNM acknowledged cost-of-living concerns. Inflation for 2026 is projected at 1.5% to 2.5%, close to the long-term average, while economic growth is forecast between 4% and 5%, supported by resilient domestic demand, a sound financial sector, and a diversified external position.
Financial System Remains Resilient
BNM noted that Malaysia’s financial system continues to provide strong support to the economy despite global uncertainties. Financial institutions are well capitalised, operationally resilient, and backed by ample liquidity buffers. Stress tests confirmed that banks can withstand severe macroeconomic and financial shocks.
Financing to small and medium enterprises (SMEs) grew 5.9% in 2025, with approvals and disbursements stable across sectors. The central bank also highlighted reforms to strengthen consumer protection and financial resilience, including the Consumer Credit Act, revisions to the Hire-Purchase Act, and the launch of the National Financial Literacy Strategy 2026-2030.
Initiatives such as the Digital Asset Innovation Hub, Climate Finance Innovation Lab, and i-CITA programme aim to develop financial solutions addressing economic and societal needs, including climate resilience. In Islamic finance, BNM noted growing opportunities to drive inclusive and sustainable economic outcomes in ASEAN.
Key Policy Highlights
Monetary policy will remain focused on maintaining price stability while supporting sustainable growth. BNM emphasised that household consumption will remain a critical anchor for growth, with positive income prospects and targeted policy support sustaining spending. Investment activity is expected to moderate, while the external sector remains resilient amid trade uncertainties and Middle East conflict risks.
ASEAN’s integration and Malaysia’s 2025 chairmanship of ASEAN/ASEAN+3 contributed to a more stable regional environment, the report said, while Malaysia was also placed under the highest category ‘Regular Monitoring’ by the Financial Action Task Force (FATF), affirming its robust anti-money laundering and counter-terrorism financing framework.
BNM’s 2025 Financials
BNM’s audited financial statements for 2025 showed total assets of RM602.22 billion, net profit after tax of RM12.45 billion, with RM7.45 billion transferred to the BNM Risk Reserves. A dividend of RM5 billion was declared to the Government.
“The Malaysian economy is resilient despite a challenging global environment. We must continue to strengthen our fundamentals and policy buffers to better position Malaysia to navigate prevailing and future headwinds,” Dato’ Sri Abdul Rasheed said.
