KUALA LUMPUR, 25 March 2025 – Bank Negara Malaysia (BNM) has issued a cautionary note regarding rising global tariff tensions, warning that such developments could pose risks to Malaysia’s economic growth and price dynamics if left unchecked.
The central bank’s assessment, detailed in its 2024 Annual Report, reflects growing concern over the proliferation of trade protectionism—including the latest round of tariffs proposed by key global players such as the United States and China.
Trade Policy Risks on the Horizon
BNM noted that Malaysia, as a trade-dependent economy, is particularly sensitive to shifts in global tariff regimes. With nearly 130% trade-to-GDP ratio, any disruption in cross-border trade flows could ripple through the national economy, affecting:
- Export volumes
- Business investments
- Supply chain efficiency
- Consumer price stability
“Heightened trade protectionism could dampen global demand, disrupt supply chains, and increase input costs for local businesses,” the report states.
Impact on Growth and Inflation
Bank Negara projects Malaysia’s GDP growth for 2025 to remain within a sustainable 4.0% to 5.0% range, but acknowledges that an escalation in tariff measures by major economies could act as a downside risk to this forecast.
In addition, higher tariffs on essential imports could lead to:
- Cost-push inflation
- Weaker consumer sentiment
- Greater volatility in commodity and input prices
BNM emphasized the importance of monetary policy flexibility to respond swiftly to any tariff-related shocks. At present, inflation remains manageable, hovering between 2.5% and 3.0%, but this outlook could shift if global supply chains are disrupted again.
Malaysia’s Resilience Strategy
To navigate the evolving trade landscape, BNM urged policymakers and industry players to focus on:
- Supply chain diversification
- Export market expansion
- Promotion of domestic sourcing
- Strengthening logistics and digital trade infrastructure
The central bank also called for continued engagement in regional and bilateral trade pacts, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP).
Collaborative Role of Public and Private Sectors
BNM’s report encourages stronger coordination between the government, private sector, and financial institutions to preemptively address trade volatility. Financial stability mechanisms, such as currency hedging tools and credit guarantee schemes, may be critical in shielding vulnerable sectors.
Export-oriented SMEs are advised to hedge against currency risks, explore new markets, and adopt digital tools to remain agile.
Staying Vigilant in a Volatile World
As geopolitical uncertainties and tariff tensions mount globally, Bank Negara Malaysia’s cautious stance underlines the importance of preparedness and adaptability. While Malaysia’s fundamentals remain strong, a proactive approach to trade policy and inflation control will be key to sustaining growth momentum through 2025 and beyond.
For continued updates on Malaysia’s economic outlook, central bank insights, and trade policies, stay tuned to ForwardMalaysia.my.
