Bank Negara Malaysia (BNM) has released its latest update on the country’s monetary and financial developments for July 2025, highlighting trends in inflation, trade, credit and the overall strength of the financial system. The data shows steady inflation, a rebound in exports, stable household loans, and resilient banks despite global uncertainties.
Malaysia recorded a slight increase in headline inflation, which rose to 1.2% in July compared with 1.1% in June. In contrast, core inflation remained unchanged at 1.8%, reflecting price stability in most goods and services.
The uptick in headline inflation was mainly driven by higher costs of fresh vegetables and airfares. However, this was partially offset by a decline in electricity prices, following the restructuring of electricity tariffs. Most households benefited from lower domestic tariff rates and rebates for lower electricity usage under the Energy Efficiency Incentive.
This balance between higher food and transport prices and lower utility bills kept overall inflation under control, maintaining Malaysia’s position as a low-inflation economy in the region.
July saw a turnaround in Malaysia’s trade performance. Gross exports grew by 6.8%, reversing a 3.6% decline in June. This rebound was largely driven by strong growth in electrical and electronic (E&E) exports, a sector that continues to be Malaysia’s backbone in global trade.
However, non-E&E exports contracted due to weaker demand for petroleum and chemical products. Commodity exports also fell, particularly palm oil and liquefied natural gas (LNG).
On the import side, growth moderated to 0.6% in July from 1.2% in June, reflecting lower demand for intermediate goods. Looking ahead, BNM stated that moderating global demand will continue to weigh on Malaysia’s export performance, especially in key commodity and manufacturing sectors.
Malaysia’s financial sector continued to provide support to businesses and households in July. Credit to the private non-financial sector expanded by 5.5%, up from 5.2% in June.
- Business loans rose by 4.9% (June: 4.5%), driven by higher investment-related borrowing among non-SMEs.
- SME loans also picked up, supported by higher demand for working capital financing.
- Corporate bonds grew by 4.8% (June: 4.3%), reflecting stronger capital market activity.
Meanwhile, household loan growth remained steady at 6%, with sustained demand across housing, vehicle, and personal financing. This reflects stable household confidence and the availability of financing in the domestic market.
Financial Markets
Developments in Malaysia’s financial markets during July were shaped by external factors, particularly US monetary policy expectations. Stronger-than-expected US economic data and higher inflation in June reduced market expectations of a rate cut by the US Federal Reserve in September.
Against this backdrop, the ringgit depreciated by 0.9% against the US dollar in July. Malaysia’s Nominal Effective Exchange Rate (NEER) fell by 0.3%, which was smaller than the regional average depreciation of 1.9%.
Bond markets, however, saw some positive movement. The 10-year Malaysian Government Securities (MGS) yield fell by 10 basis points, supported by Bank Negara’s Overnight Policy Rate (OPR) cut in July and an improved fiscal outlook.
On the equities side, the FBM KLCI declined by 1.3%, contrasting with the regional average gain of 6.2%, as foreign equity outflows weighed on investor sentiment.
Banking Sector
Malaysia’s banking system remains a pillar of stability. As of July 2025, banks maintained a healthy capital adequacy ratio of 18.4%, well above international requirements. This strong capital base ensures that banks can continue to support credit growth while withstanding potential economic shocks.
The sector recorded excess capital buffers of RM143.3 billion, providing additional resilience.
Asset quality also remained stable. The gross impaired loans ratio stood at 1.4%, while the net impaired loans ratio was 0.9%. Borrowers’ repayment capacity remained intact, supported by steady employment and income conditions. Loan loss coverage, including regulatory reserves, was maintained at a prudent 128.9% of gross impaired loans.
Malaysia’s July 2025 financial and monetary data reflects an economy that is navigating global uncertainties with resilience. While inflation remains low and under control, external demand challenges continue to affect trade performance.
Nevertheless, steady loan growth, resilient banks, and proactive monetary policy provide a strong foundation for the economy. Moving forward, Malaysia is expected to focus on maintaining stability, supporting domestic demand, and ensuring its financial system remains robust amid global headwinds.
For full details and official updates, readers are encouraged to visit Bank Negara Malaysia’s official website.
Shahriena Shukri is a journalist covering business and economic news in Malaysia, providing insights on market trends, corporate developments, and financial policies. More about Shahriena Shukri.
