KUALA LUMPUR: Malaysia's economy is expected to grow 5.0 per cent in 2024 before coming in at around 4.6 per cent in 2025, according to HSBC Global Research.
HSBC said while trade recovery continues to catch up with Malaysia's peers, consumption and particularly investment held up the growth momentum.
"As the global trade has improved substantially since the start of this year, trade-dependent economies in Asia, particularly the ones with heavier exposure to the electronics supply chain, have been benefiting.
"Malaysia is no exception, given its significance in the technology supply chain," it said in a note today.
HSBC Research was commenting on the nation's economic growth of 5.3 per cent in the third quarter (3Q) of this year.
Although Malaysia's trade had improved, the firm noted that the pace is still slower than regional peers like Korea and Taiwan, which have direct exposure to the AI-powered chips.
"Today's GDP breakdown by expenditure indicated there is room for Malaysia's trade sector to improve, further boosting growth," it said.
HSBC said all eyes are now on the US trade policies after Donald Trump has been elected as the new president.
According to the firm, many of his proposed policy measures would likely hit global trade but there is still a great deal of uncertainty.
It said Asean's sizeable trade surplus with the US may attract unwanted attention.
"A closer look at trade by individual Asean economies with the US reveals that the region has gained substantial market share in certain sectors since the start of the US-China trade tensions.
"For example, Vietnam's textiles and footwear sector, as well as Malaysia's semiconductor and Thailand's auto parts sectors may be some areas that are vulnerable to tariff risks," it said.
Despite a continued recovery in trade, the firm said consumption and investment have come to the partial rescue.
It added that despite moderating from the second quarter, growth momentum remained strong at 1.8 per cent quarterly in the 3Q.
"What caught our eyes is the impressive growth in gross fixed capital formation (GFCF), whose momentum itself grew close to 6.0 per cent q-o-q, pushing y-o-y growth to over 15 per cent in 3Q only.
"The strength came from both the public and private side. We surmise this was likely related to investment in data centres and public infrastructure," it added.