Malaysia’s Economy Grew Faster Than Forecasted in 2Q, Inflation Lowered

Malaysia’s GDP grew 5.8% compared to the second quarter of 2025, and headline inflation dropped to 1.9% in June.

Following Bank Negara Malaysia’s (BNM) reaffirmation last week of the domestic economy’s resilience, the Department of Statistics Malaysia (DOSM) has released 2Q figures that pretty much confirm that outlook.

According to DOSM’s flash estimates, GDP expanded 5.8% year-on-year for the April-to-June period – a result that beat the consensus among analysts polled by Bloomberg.

While the department noted that the agriculture sector saw a slight contraction, it was a broad-based performance elsewhere, with nearly every other sector recording growth.

These figures align well with BNM Governor Datuk Seri Abdul Rasheed Ghaffour’s earlier comments, which maintain an expectation for the economy to expand by 4% to 5% for the full year.

The real standout, however, was manufacturing. The sector accelerated to 7.5% growth in the second quarter, up from 5.9% in the first, largely driven by export-oriented industries – particularly in electrical, electronic, and optical products.

Inflation Eased To 1.9% In June

On the inflation front, Malaysia’s Consumer Price Index (CPI) rose 1.9% year-on-year in June, coming in just under the 2% forecast by a Bloomberg poll and down slightly from May’s 2% reading.

On a month-on-month, seasonally adjusted basis, consumer prices actually held flat.

Compared to the rest of the region – where many Asian countries are grappling with energy and material shortages tied to the ongoing Middle East conflict – Malaysia’s inflation has stayed relatively tame.

A big reason for this is the government’s essential goods subsidies, which have shielded everyday Malaysians from the worst of global commodity price spikes.

Breaking down the numbers, transport costs eased significantly, rising 2.8% in June compared to 3.8% in May, thanks to lower retail prices for unsubsidised fuels like RON97 and diesel. Education and personal care also saw smaller price hikes.

That said, consumers felt a pinch in financial services, where insurance and banking costs accelerated to 5.7% from 4.9% the month before.

Dining out and hotel stays also got a bit pricier, with the restaurant and accommodation segment ticking up to 2.6%. Housing and utilities rose 1.4%, partly driven by higher electricity surcharges for heavy domestic power users in Peninsular Malaysia.

Meanwhile, the food and beverage sector – which makes up nearly a third of the total index – held steady at a 1.4% growth rate for the second month in a row.

Interestingly, while the cost of cooking at home picked up a bit, dining out actually saw a marginally lower price gain.

Under the hood of the grocery bill, vegetable prices continued to slide with garlic and brinjal seeing double-digit drops but meat prices jumped.

Standard chicken prices bounced back after a dip the previous month, averaging RM10.77 per kilogramme nationwide.

Finally, core inflation – which strips out volatile items like fresh food and price-administered goods to show the true underlying trend – came in just a smidge lower at 1.9%.