BNM Publishes Annual Report 2025, Economic and Monetary Review 2025, and Financial Stability Review for Second Half 2025

1. Bank Negara Malaysia (BNM) today released its Annual Report 2025 (AR 2025), Economic and Monetary Review 2025 (EMR 2025), and Financial Stability Review for Second Half 2025 (FSR 2H 2025).

2. AR 2025 highlights BNM’s key initiatives in the past year in discharging its mandates to promote monetary and financial stability conducive to the sustainable growth of the Malaysian economy. The report also provides an account of the broader central bank operations. Meanwhile, EMR 2025 provides BNM’s economic assessments and forecasts, covering economic and monetary developments in 2025 and the outlook for 2026. The FSR is a biannual publication which details BNM’s assessment of domestic financial stability risks and outlook. Highlights of the reports. 

Building the Energy Resilience ASEAN+3 Needs

1. Energy systems across ASEAN+3 (the Association of Southeast Asian Nations, plus China, Japan, and Korea) are under increasing strain. Climate shocks are threatening infrastructure and supply. The rapid expansion of AI and digital infrastructure is driving a surge in electricity demand. And geopolitical tensions are adding new volatility to global energy markets.

2. Although the region is more resilient to energy shocks than in the past, these forces are creating new challenges for macroeconomic stability. Climate change is no longer only an environmental issue. It is increasingly testing energy systems – including power generation, fuel supply chains, and electricity networks – with far-reaching effects on the broader economy.

Governments Must Focus on Spending Better, Not More

1. Finance ministries across ASEAN+3 face mounting pressures from aging populations, climate adaptation, rapid technological change, infrastructure upgrades and in some cases national security—while grappling with rising debt service burden.

2. With large tax hikes politically unpalatable and broad spending cuts threatening growth and social cohesion, policymakers are shifting focus from spending more to spending better.

3. Making spending more productive begins with better allocation, effective implementation, and robust institutions to support this process.

Shock and Resilience: ASEAN+3 and the Conflict in the Middle East

1. The US–Israel military operation against Iran that began on 28 February 2026 has triggered the most significant disruption to global energy markets since 2022. At the time of writing, the Strait of Hormuz – through which roughly a fifth of global oil and liquefied natural gas (LNG) trade normally flows – has been effectively closed to commercial shipping. Oil prices have surged well above pre-conflict levels and remain elevated and volatile.

2. For ASEAN+3, which sources over a third of its oil and gas from the Middle East, the exposure is direct. The risks – higher energy import bills, pass-through to inflation, and potentially tighter financial conditions – should not be understated.

3. Based on AMRO’s internal estimates, if oil prices remain elevated at around USD 90 per barrel for the remainder of the year, inflation in the region could increase by an additional 0.7 percentage points, and growth reduced by 0.2 percentage points.

4. But this is not the 1970s. Nor even 2022. ASEAN+3 enters this episode from a position of strength – in its macroeconomic conditions, the policy space available to respond, and in how the structure of its economies has changed.

Malaysia: Leveraging the Investment Upcycle for Durable Growth Amid Geoeconomic Fracturing

1. The Malaysian economy has demonstrated notable resilience despite rising global trade protectionism and geopolitical tensions. Robust electronics exports and AI-related investment have supported growth, reflecting Malaysia’s entrenched position in global semiconductor and electronics value chains and its gains from the ongoing global tech upcycle. 

2. Political stability as well as policy clarity and credibility have reinforced investor confidence. Sustaining this investment momentum will require preserving macroeconomic and financial resilience, deepening domestic capabilities, and strategically positioning Malaysia as a trusted hub amid geoeconomic fracturing.

3. This preliminary assessment follows AMRO’s Annual Consultation Visit to Malaysia from January 26 to February 6, 2026. The mission was led by Lead Economist Kian Heng Peh. AMRO Director/CEO Yasuto Watanabe and Chief Economist Dong He participated in the policy discussions and met with Bank Negara Malaysia (BNM) Governor Dato’ Sri Abdul Rasheed Ghaffour and Deputy Minister of Finance Liew Chin Tong.

ASEAN+3 Region Expected to Grow at 4.0 Percent in 2026, External Uncertainty Remains Elevated

1. AMRO today released its quarterly update of the ASEAN+3 Regional Economic Outlook (AREO). It estimates the ASEAN+3 economy to have grown by 4.3 percent in 2025, and projects growth to moderate to 4.0 percent in 2026. Inflation is estimated at 0.9 percent in 2025 and projected at 1.2 percent in 2026, remaining below the region’s long-run average.

Indonesia’s Consumer Stimulus: Impacts for Foreign Investors

1. Indonesia’s bold US$1.5 billion stimulus package, unveiled in late May 2025, is set to ripple through Southeast Asia’s largest economy — and foreign investors should be paying attention.

2. While the measures are aimed at boosting local household consumption, the indirect effects could reshape demand patterns across consumer goods, retail, energy, transportation, and financial sectors, opening fresh opportunities for foreign businesses.

Singapore Is Warning of a Recession: Here’s What to Look For

 1. After a better-than-expected start to 2025, the government is warning of a growing risk that the economy may slip into its first technical recession since the pandemic.

2. Beh Swan Gin, permanent secretary at the trade ministry, emphasized that such a contraction — defined as two consecutive quarters of contraction — “doesn’t necessarily equate to a full-blown economic recession.” The government maintained its full-year growth forecast at a cautious 0% to 2%.

3. As the impact of the US-led tariff escalation begins to bite, Singapore is the first Southeast Asian country to flag the risk of a technical recession, an event that has only happened twice in the past 20 years — at the start of the Covid-19 pandemic in 2020, and during the global financial crisis, when the city-state had four straight quarterly contractions beginning in June 2008.

4. The newly re-elected government of Prime Minister Lawrence Wong is already spending billions of dollars in subsidies and handouts to help households cope with the rising cost of living and create more jobs. But with such a high dependence on global trade, the nation’s economic path this year is likely to be dictated by the unpredictable trade battle between the US and China.

Pakistan’s Battle for Gulf Investments: Economic Crises and India’s Growing Influence

1. Pakistan’s economic situation is teetering on the brink as the country is facing a perilous financial crisis, scrambling to secure external financing to meet growing obligations. The country has received only temporary relief from a US$7 billion staff-level agreement with the International Monetary Fund.

2. Pakistan’s financing need for the 2023–2024 fiscal year is estimated at US$25 billion. To bridge this gap, Pakistan has turned to its traditional allies — Saudi Arabia, the United Arab Emirates (UAE) and China — to seek additional financial support, debt restructuring and foreign direct investment (FDI). Pakistan aims to re-profile US$12 billion in bilateral debt, with US$3 billion owed to the UAE, US$4 billion to China and US$5 billion to Saudi Arabia. The goal is to extend the repayment of these loans over the next three to five years, providing Pakistan with a more stable financial foundation.

3. Pakistan has opened the door to Gulf countries, especially Saudi Arabia and the UAE, through the Special Investment Facilitation Council — a platform to attract FDI in key sectors such as agriculture, mining, energy and infrastructure. FDI increased to US$1.9 billion in 2023–2024 fiscal year compared to US$1.6 billion in 2022–23 fiscal year, a 17 per cent increase. Although China remains the largest contributor, there has been an increase in FDI from Saudi Arabia and UAE, rising from US$1 million to US$10 million over the 2022–2023 fiscal year.

4. Saudi Arabia and the UAE have shown interest in agriculture and mining, sectors where significant investment opportunities exist. These investments align with their broader strategies — Saudi Arabia’s Vision 2030 and the UAE’s post-oil economy strategy — to diversify their economy away from oil dependency and expand their global influence. By investing in Pakistan, both nations seek to strengthen their diplomatic ties and economic presence in South Asia, tap into new markets and expand their geopolitical reach.

Sino-EU cooperation

1. The European Union's competitiveness report released by Mario Draghi, a former European Central Bank chief.

2. The report, in a way, is an acknowledgement of China's phenomenal transformation over the past decade toward a more sustainable and innovation-driven economy. The sheer fact that China is mentioned many times in the report and that the EU now sees a huge gap not just with the United States but also with China is telling, especially because many Europeans still see China as a country providing cheap labor — although that is no longer true, according to the Draghi report.

3. A decade ago, when China announced its strategic shift, from investment-driven quantitative economic growth to innovation-led high-quality development, not many people took it seriously. Today, China has become a global leader in research and development, renewable energy including solar and wind energy, and electric vehicles (EVs).

4. China is catching up fast with the industrialized world, partly by learning from the EU and other developed economies, but more importantly through massive investments in R&D. Who would have thought just a decade ago that China's robot density would rank fifth in the world, trailing South Korea, Singapore, Germany and Japan but ahead of the US and the average EU member state?

Understanding WTO Rules on Subsidies: The Agreement on Subsidies and Countervailing Measures

 1. The World Trade Organization (WTO) plays a crucial role in regulating international trade, including the use of subsidies by governments. The Agreement on Subsidies and Countervailing Measures (SCM Agreement) sets the legal framework for how subsidies can be used and challenged to ensure fair competition in global markets.

2.  In this post, we will explore the key aspects of the SCM Agreement, including prohibited and actionable subsidies, countervailing measures, and special rules for agricultural subsidies.

Malaysia's industrial output up 5pct in June

1. Industrial output rose 5.0% compared to the same month of the previous year in June, which followed May’s 2.4% increase. The notable pickup was partly driven by faster growth in manufacturing output. In addition, mining and quarrying output rebounded.

2. As a result, the trend improved sizably, with the annual average growth of industrial production coming in at 2.0%, up from May’s 1.4% reading.

3. On a monthly basis, industrial output increased 0.7% in seasonally adjusted terms in June, which was below May’s 1.7% expansion.

China’s shrinking FDI and what it means for its economy

1. FDI into China in 2023 increased by the lowest amount since the early 1990s amid growing disinvestment and concerns about the country’s sluggish economic recovery.

2. According to data released by the State Administration of Foreign Exchange on Sunday, China’s direct investment liabilities – including foreign companies’ retained earnings in the country – reached $33bn (237.53bn yuan) in 2023. The measure is 82% lower than the 2022 level and the lowest recorded since 1993, one year after private business ownership gained full legal status in the country.

3. In November 2023, Chinese officials reported a $11.8bn drop in direct investment liabilities during the third quarter of 2023, showing how growing tensions between Beijing and the West impact the country’s investment climate.

4. Despite the swift economic recovery following Covid, FDI inflows into China slowed in 2022 as a result of the government’s Zero Covid policy – in place until the end of that year – coupled with economic policy uncertainty.

5. At the same time, Beijing has stepped up its crackdown on foreign companies. In January 2024, Beijing launched an anti-dumping investigation into French brandy imports. The announcement came a few weeks after the EU Commission began investigating allegations of biodiesel dumping from China into the EU market and three months after Brussels said it was looking into claims that China was illegally subsidising its electric vehicle market.

6. The Chinese tech sector, however, has seen the most significant drop in market valuation, as continued pressure from the Chinese authorities wiped $1.1trn off China’s major tech companies between 2021 and 2023, according to Refinitiv data cited by Reuters.

7. The US Department of State warns that China’s market remains a “relatively restrictive environment for foreign investors” because of prohibitions on investment in key sectors, as well as unpredictable regulatory enforcement.

8. For that reason, many companies have diversified their investments away from China, instead announcing expansion plans in other Asian nations such as India, Malaysia, the Philippines and Vietnam.

Malaysia's industrial output grows faster-than-expected in March, May 2024 official data shows

 1. Malaysia’s industrial output rose at a faster-than-expected pace in March from a year earlier with the manufacturing sector leading broad gains, the Department of Statistics Malaysia (DOSM) said.

2. The industrial production index — which measures output from factories, mines, and power plants — climbed 2.4% in March compared to the same month in 2023. That was better than the median 1.9% increase predicted in a Bloomberg survey but slower than February’s 3.1% year-on-year growth.

3. On a month-on-month basis, the index rebounded 7.5% in March from February’s decline of 6.3%.

4. The latest reading dovetails with modest improvement in factory output in major exporters China, South Korea, Vietnam and Taiwan over the same month. However, industrial production fell in Singapore while that of the US, Japan, and Thailand declined further in March.

Thai manufacturing sector shrinks for 5th month amid ASEAN slowdown

1. The purchasing managers' Index (PMI) for the ASEAN region fell for the third straight month in December, dropping 0.3 points from November to 49.7.

2. The fall reflected a rapid decline in new orders, to the lowest level in 28 months. This led to a decrease in new export orders and weakened overall output, marking the slowest growth in the manufacturing sector in 27 months.

Malaysia Industrial production index growth at 6.9% in 2022

1. Industrial Production Index (IPI) is a measure of the rate of change in the production of industrial commodities in real terms over time for Manufacturing, Mining and Electricity Sectors. 

2. It is measured based on volume changes in production.  IPI are the overall index from the Index of Mining, Manufacturing and Electricity. IPI give the overview of the current trend of industrial activities and used for economic analysis.

3. Industrial production and capacity levels are expressed as an index level relative to a base year. Within the overall IPI, there are a number of sub-indices providing a detailed look at the output of highly specific industries. 

4. Industry-level data are useful for managers and investors within specific lines of business, while the composite index is an important macroeconomic indicator for economists and investors—fluctuations within the industrial sector account for most of the variation in overall economic growth.

Global Supply Chain Pressure Index (GSCPI) & Supply Chain Pessure in September 2022

1. The Global Supply Chain Pressure Index (GSCPI) is a new measurement of supply chain conditions, created by the Federal Reserve Bank of New York. The index combines variables from several indices in transportation and manufacturing, such as those related to delivery times, prices, and inventory.

2. The index is meant to help policymakers, businesses, and consumers understand the state of global supply chains.

Malaysia 2Q2022 Vistage-MIER CEO Confidence Index

1. The CEO Confidence Survey is a monthly survey of 100 chief executive officers (CEOs) from a variety of industries in the U.S. economy. The survey is conducted, analyzed, and reported by the Conference Board and it seeks to gauge the economic outlook of CEOs, determining their concerns for their businesses, and their view on where the economy is headed.

2. A reading of the survey index with a value above 50 indicates that the CEOs surveyed are more bullish than bearish on their economic outlook. The Conference Board's CEO Confidence Survey is seen as a leading economic indicator and it competes with Chief Executive magazine's CEO Confidence Index.

Consumer Insights & Trends Affecting Your Business

1. Euromonitor International has identified five key consumer insights from the results of its Voice of the Consumer: Lifestyles Survey. The survey was fielded to over 40,000 respondents in 40 countries worldwide in early 2021.

2.Consumers are demanding that companies care beyond revenue; they no longer perceive businesses as profit-driven entities. Protecting the health and interest of society and the planet is the new expectation, in order to Build Back Better. Companies should help reshape the world in a more sustainable way, leading a shift from a volume- to a value-driven economy and turning the tide on social inequity and environmental damage.

3. Global consumers are more focused on value, emotional wellbeing and hybrid lifestyles across the physical and digital worlds. Companies that can respond and align to these needs will be better placed to succeed and grow. With lessons learnt from the pandemic and the global recession, it is vital to prevent future shocks and disruption to your business.

Major Leading & Lagging Economic Indicators

1. Paying attention to economic indicators can give you an idea of where the economy is headed so you can plan your finances and even your career accordingly.

2. There are two types of indicators you need to be aware of:

3. Leading indicators often change prior to large economic adjustments and, as such, can be used to predict future trends.

4. Lagging indicators, however, reflect the economy’s historical performance and changes to these are only identifiable after an economic trend or pattern has already been established.