Meanwhile, in Malaysia, Anwar has launched a better minimal wage and elevated salaries for the civil service – strikes that ought to increase personal consumption and spur financial development, Malaysian economist Shankaran Nambiar stated.
Despite this, Nambiar harassed that the upper minimal wage, together with one other coverage mandating pension contributions for overseas staff, are strikes that can hit small and medium-sized enterprises (SMEs) and probably weaken the financial system.
Consistently described because the spine of Malaysia’s financial system, SMEs account for 48% of employment and contribute 38% of the nation’s GDP, in response to an October 2023 report by skilled companies agency EY.
Malaysia’s SME sector grew by 5% and contributed RM613.1 billion to GDP in 2023, however stays extremely susceptible to exterior components equivalent to political selections, technological developments and geopolitical occasions.
After Anwar’s Budget 2025 speech, SMEs had warned that the upper minimal wage and obligatory contributions to the Employees’ Provident Fund (EPF) for overseas staff would additional hit their earnings at a time when their margins they had been already lowered.
“The personal sector, particularly the SME sector, will not be in favor of a compulsory EPF contribution for overseas staff. Higher prices might hit a few of the much less vibrant and smaller corporations,” Nambiar stated.
“With international development marking a barely decrease stage in 2025… and China not having the ability to publish as exuberant numbers as historically, Malaysia is more likely to transfer nearer to the 4.5% decrease sure (in GDP development) .”
Malaysia’s Finance Ministry stated in its macroeconomic outlook for 2025 that the worldwide financial system is anticipated to develop by 3.3% subsequent 12 months, whereas China is anticipated to publish development of 4.5% primarily attributable to explanation for “sluggish productiveness”.
TRUMP’S THREATS
China’s fragile financial system is bracing for extra US commerce tariffs underneath the second Trump administration, which has threatened tariffs of greater than 60% on imports of Chinese items.
The United States has additionally begun imposing tariffs on photo voltaic power imports from Vietnam, Thailand, Cambodia and Malaysia, aiming to rein in Chinese corporations looking for to diversify their provide chains to keep away from harder tariffs.
Nambiar stated using tariffs as a overseas coverage measure might act as a drag on Malaysia’s financial system.
“The previous story of anticipating Chinese corporations to maneuver to Malaysia to keep away from tariffs is not going to work, except there’s vital native content material,” he stated.
“Malaysia will should be clearer about its insurance policies, notably in direction of China. The Trump administration could not tolerate ambiguity too properly.”
Asrul Hadi Abdullah Sani, companion at strategic consultancy agency ADA Southeast Asia, stated the area’s commerce surplus with the United States might additionally make Malaysia’s exports, notably semiconductor industries, susceptible to tariff dangers.
“Therefore, it’s vital for Malaysia to proceed to diversify its commerce partnerships,” he stated.
Asrul Hadi stated the Malaysian authorities ought to proceed to streamline its companies and departments, facilitate regulatory processes and enhance transparency in decision-making.
“This method will make Malaysia extra enticing for overseas funding, particularly because the federal authorities goals to strengthen the nation’s place within the international semiconductor provide chain,” he added.
Sunway University’s Yeah, nonetheless, highlighted that Trump’s flip to tariffs and different commerce weapons to guard US industries could have combined results on Malaysia, given the openness of the nation’s financial system and good relations with each America and with China.
“The diversion of commerce and funding throughout Trump’s first time period and the (present President Joe) Biden administration’s commerce disputes with China have benefited Malaysia, as evidenced by elevated overseas direct funding and commerce quantity ,” he stated.
“It must tackle the damaging commerce affect and provide chain disruptions ought to the tariff will increase materialise. This will contain assembly demand circumstances, looking for various markets and offering help to affected companies to reduce lasting injury to the Malaysian financial system.”
Malaysia’s Finance Ministry stated in its macroeconomic outlook that whereas commerce quantity with China is considerably greater than that of the United States, commerce with Washington is “essential” for strategic financial sectors equivalent to expertise and healthcare .
“Any coverage shift in direction of protectionism, equivalent to greater tariffs and new non-tariff measures in these nations, might carry repercussions to Malaysia’s exterior sector,” he stated.
Considering Trump’s tariff escalation and ongoing wars within the Middle East and between Russia and Ukraine, Yeah speculated that exterior circumstances are anticipated to be risky and unpredictable subsequent 12 months.
“To preserve development, the federal government will should be agile and pragmatic in responding to probably giant, destabilizing modifications within the worldwide commerce and funding surroundings,” he stated.
