By Saleh Mohammed
Last week, I posed a tough question: “Rethinking Growth – For Whom Are We Building the Future?” This week, I want to go further. Let’s go beyond the headlines and get a clearer picture of where Malaysia’s economy really stands.
On the surface, the numbers may seem comforting. Malaysia’s gross domestic product (GDP) grew by 5.1% in 2024, giving a short-lived euphoria to many. But that optimism was quickly tempered. In the first quarter of 2025, GDP slowed to 4.4%, signaling a loss of momentum, especially when viewed in the context of global uncertainties.
Industrial Activity: Losing Steam
The Industrial Production Index (IPI) showed similar cracks. A 3.8% growth in 2024 tapered off to 2.4% between January and April 2025. In May, it was forecasted to grow 2%, but it barely reached 0.3%, confirming that industrial activity is running out of steam. It’s not just a number—it’s a red flag.
This pattern reflects in our total trade as well. In 2024, trade hit a record RM2.879 trillion, growing 9.2%. But in the first half of 2025, the growth halved to 4.8%. Even more concerning is that imports are rising faster than exports, shrinking our trade surplus from RM66.12 billion in 1H2024 to RM55.53 billion in 1H2025. In May alone, the trade surplus dropped to just RM766.3 million—the second lowest since 1997.
Despite having maintained a surplus for 62 consecutive months since May 2020, this shrinking surplus, coupled with weak demand, rising input costs, falling inventories, and the looming US tariffs, does not inspire confidence.
Manufacturing Under Pressure
The Purchasing Managers’ Index (PMI), a key gauge of manufacturing health remained in contraction territory for all of 1H2025, staying under the neutral 50.0 mark. This mirrors the GDP’s own downward trajectory over recent quarters:
- 2Q2024: 5.9%
- 3Q2024: 5.4%
- 4Q2024: 4.9%
- 1Q2025: 4.4%
The trend is worrying.
Stock Market and Productivity: Signs of Structural Weakness
Even with 55 IPOs in 2024, the stock market remained sluggish, showing that optimism in capital markets hasn’t translated into real, broad-based investor confidence.
Real GDP from 2022 to 2024 increased by 9% to RM1.65 trillion, but on a per capita basis, the gain is only 4.5% to RM48,391. This disconnect shows that macro-level success doesn’t always reflect at the micro-level, especially when wealth inequality remains high. The top 10% own 70% of national wealth, with much of it coming from capital income that is still not taxed.
At the same time, Malaysia continues to offer generous incentives, especially under the JS-SEZ in Johor, to attract capital, raising legitimate questions on inclusivity and equity.
Productivity and Innovation: A Struggle to Catch Up
The 12th Malaysia Plan (12MP) targets RM107,170 per employee productivity by 2025, but in 2024 we only reached RM99,137. To meet the 2025 goal, productivity must jump 8% in a single year—a tall order considering the actual achievements in the 10MP and 11MP were only 1.9% and 1.2%.
While the Global Innovation Index (GII) ranked Malaysia 33rd in 2024, it’s worth noting that 6 indicators worsened, especially those related to innovation outputs, suggesting more form than substance.
Inflation, Competitiveness & Living Standards
Inflation may be easing, but real wages have not kept pace. Malaysians still feel the pinch as cost of living pressures remain acute, and productivity gains haven’t translated into better pay.
The silver lining? Malaysia climbed 11 spots to 23rd in the 2025 IMD World Competitiveness Index, scoring 74.1 points. But let’s remember, we were ranked 12th back in 2014, with a more impressive 82.1 points. We’re recovering—but still behind our own past performance.
Fiscal Responsibility and the Ringgit’s Strength
Malaysia may be seeing some temporary gains in the ringgit, but currency strength is volatile, tied to global interest rates and short-term trends more than underlying strength.
Record budgets must now be used wisely. We must avoid the trap of spending without outcomes, and especially pro-poor strategies that become populist, rather than structurally reformative.
Proposals like returning 25% of federal taxes to state governments, though seemingly appealing in theory, are impractical at a time when we can’t even fix basic infrastructure like roads—while government debt edges dangerously close to exceeding the 65% ceiling.
The FDI Puzzle
Our attractiveness to global investors is also under threat. FDI dropped from RM74.6 billion in 2022 to RM51.5 billion in 2024. We need to ask: why are investors hesitating, and what must we do differently to restore confidence?
Where Do We Go From Here?
The numbers, when taken together, point to one conclusion: Malaysia is losing economic momentum, and unless we realign our priorities, productivity, innovation, equity, and long-term reforms, we risk stagnation.
Yes, there are achievements worth celebrating. But we cannot afford to ignore the struggles of ordinary people. A growing economy must grow for everyone, not just the top 10%.
Let’s reform, not just perform. Let’s measure impact, not just input. And let’s build a Malaysia that’s strong at the foundation, not just impressive in the headlines.
As Thomas Jefferson said, “I like the dreams of the future better than the history of the past.” The real question is: Are we building those dreams for all Malaysians, or just a few?
What say you?
In a nutshell the current government doesn’t have a clear direction. We are not moving in tandem to achieve a coherent objective. Everyone doing their own thing and trying to score as much brownie points for their own ministries. This is due to weak leadership who leads with hot air.