United Overseas Bank Ltd (UOB) lowered Malaysia’s gross domestic product growth forecast to 4% from 4.7%, while Malayan Banking Bhd (Maybank) cut its forecast to 4.3% from 4.9%.

Both banks see a possibility of an interest rate cut by Bank Negara Malaysia this year.

The 24% reciprocal tariff imposed by the US on Malaysian products is within UOB’s expectation, economists Julia Goh and Loke Siew Ting said in a note.

Still, the Southeast Asian country will also be impacted by stiffer levies imposed on major trading partners like China, the EU and Japan.

“The risks of escalation and retaliation by other countries have risen,” they wrote.

“This would impede global trade, growth, and investments more than previously anticipated though not to the extent of an outright recession just yet,” they added.

UOB views the tariff implications on consumer price inflation in Malaysia as small, with supply-driven factors and potential excess supply dumping activities neutralising the effects.

Maybank’s downgrade for Malaysia is among the largest in the region along with Vietnam and Singapore due to the country’s heavier reliance on trade, analysts including Chua Hak Bin and Suhaimi Ilias wrote in a separate note.

“Any additional US tariff on semiconductors could also impact Malaysia,” they said.

They have estimated a potential 25-basis-point interest rate cut for Malaysia between this year and 2026.