Tariff pause spurs front-loading to bolster trade, manufacturing

In a note today, it said the 90-day suspension of differential tariffs offers a brief reprieve for non-retaliating countries such as Malaysia.

During this period, trade activity - led by exports of manufactured goods - is likely to be buoyed by accelerated shipments while trade negotiations with the United States are underway.

"Nonetheless, Malaysia's growth outlook is clouded by global headwinds such as US trade policy uncertainties and escalating US-China trade tensions.

"The growth momentum may still lose steam as trade uncertainties hamper capital spending and hiring plans," it added.

As such, CIMB Investment Bank maintained its full-year gross domestic product (GDP) growth projection for Malaysia at 4.0 per cent, reflecting risks of external demand weakness and adverse spillover to the domestic economy.

At the same time, it also projected that Bank Negara Malaysia may cut the overnight policy rate (OPR) by 25 basis points at its July meeting, bringing the end-2025 rate to 2.75 per cent, in a bid to support domestic demand.

The investment bank said the advance estimates showed Malaysia's GDP growth eased more than expected to 4.4 per cent year-on-year (y-o-y) in the first quarter of 2025 (1Q2025) (4Q2024: 5.0 per cent), compared with its forecast of 4.5 per cent and Bloomberg's consensus of 4.8 per cent.

On a sequential basis, the economy fell 3.7 per cent quarter-on-quarter (q-o-q), sharper than the average 1Q decline of 3.4 per cent q-o-q in the past three years (1Q2022-1Q2024).

However, CIMB Investment Bank noted there is potential for an upward revision to the 1Q2025 GDP reading, driven by an unexpected surge in exports (March: 6.8 per cent y-o-y, February: 6.2 per cent y-o-y).