What Malaysia's 2025 Economic Outlook Means For Your Wallet

Iman Aminuddin

30th September 2025 - 3 min read

The Department of Statistics Malaysia [PDF] projects GDP growth between 4.5% and 5.5% for 2025, with inflation easing to about 3%. These forecasts come just before the national budget announcement on 10 October, which could reshape the economic environment.

Job Market Outlook Shows Ongoing Struggles

Despite steady GDP growth, the employment landscape remains difficult. Technology firms continue to restructure, and gains in manufacturing output have not resulted in many new jobs. Productivity improvements rely more on automation than workforce expansion.

Salary increases remain modest after widespread freezes in 2024, with many employers continuing this trend into 2025 despite rising inflation. Workers who change jobs now typically see raises of 8% to 12%, lower than previous years’ 15% to 20%.

New graduates face stiff competition, especially in Kuala Lumpur, where entry-level roles attract hundreds of applicants. Starting salaries of RM2,800 to RM3,500 have changed little since 2021, even as qualifications and living costs rise.

The gig economy contributes substantially to the digital sector but often lacks traditional job benefits. For many, multiple income streams have become a necessity to manage financial risks.

Inflation Affects Household Spending Differently

Overall inflation is expected to stay around 2.5% to 3%, but some expenses are rising faster. Education costs may increase by 8% to 10%, medical insurance premiums by 12% to 15%, and transport expenses are climbing beyond headline inflation.

Household inflation depends on individual spending. Families with children in school may feel the impact more sharply than general inflation rates suggest. Fixed deposit interest rates around 3% currently only keep up with inflation without increasing purchasing power.

The upcoming budget may introduce changes such as subsidy adjustments or new taxes, which could alter household expenses beyond inflation trends.

Property Market Remains Selective, Investment Priorities Shift

The property sector shows uneven performance. Developers target homes priced above RM500,000, while affordable options remain limited. Banks have tightened lending rules, especially for contract and gig workers.

First-time buyers often need RM40,000 to RM50,000 upfront for a RM400,000 property to cover down payments and legal fees. Given employment uncertainties, banks are applying stricter assessments of loan affordability.

Investors are focusing more on liquidity than high returns, and are advised to keep savings that cover six to nine months of living costs. Changes in investment incentives or tax relief from the October budget could influence this cautious approach.

Regional Differences Affect Cost Of Living And Opportunities

Kuala Lumpur offers the most job opportunities but also higher living costs. Even with a salary of RM6,000, you may have less money left over than someone earning RM4,500 in smaller cities after paying for expenses.

Penang’s semiconductor sector remains steady, though popular areas’ costs are approaching those in Kuala Lumpur. Johor benefits from being close to Singapore, but ringgit earners face challenges competing with higher Singapore dollar salaries in housing.

Remote work policies have largely reversed in 2024, with many employers requiring a return to office, influencing commuting and lifestyle choices.

Financial Stability Should Take Priority

Economic growth is expected to be moderate, while job market challenges persist. The gap between GDP figures and the quality of employment is likely to remain throughout 2025. Households should prioritise managing finances carefully and maintaining stability rather than seeking rapid growth in uncertain conditions.

The upcoming October budget will offer clearer insight into government plans and support measures, although long-term solutions are needed to address structural labour market issues.

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