Malaysians hoping for a boost from next month’s budget should brace themselves for disappointment, economists warn, as Prime Minister Anwar Ibrahim’s room to hand out cash and subsidies shrinks with US tariffs starting to bite.
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Anwar, who is also finance minister, is expected to present a budget on October 10 that bolsters small and medium-sized businesses and scales up Malaysia’s capabilities in the semiconductor, electric vehicles and rare earths sectors.
But the projected fall in US demand for its vital exports, which cut across electrical and electronics products to furniture and chemicals, is likely to crimp the government’s ability to roll out any new populist measures.
“The impact of high US tariffs … may finally emerge in the fourth quarter of 2025,” said Muhammad Saifuddin Sapuan, an economist with Malaysia-based Kenanga Investment Bank. “Fiscal space is limited because GDP is not growing fast enough.”
Bank Negara Malaysia in July revised its growth forecast downwards to between 4 and 4.8 per cent this year, down from its earlier projection of 4.5 to 5.5 per cent, given persistent global uncertainties largely driven by US President Donald Trump’s tariff regime.
Malaysia has been hit by a 19 per cent tariff on par with its Southeast Asian counterparts.
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Initially, exports grew sharply, according to government data, as US businesses front-loaded orders to avoid paying tariffs, which took effect on August 1.
But that spells a delay rather than a cancellation to the impact of those levies, experts have said.