BNM now sees the economy expanding within the range of 4% to 4.8%, lower than its previous forecast of 4.5% to 5.5%.

It also trimmed its inflation forecast this year to 1.5% to 2.3%, from 2% to 3.5%, amid a moderation in cost and demand outlook.

“The updated growth projections account for various tariff scenarios, ranging from a continued elevation of tariffs to more favourable trade negotiation outcomes,” BNM said in a statement today.

“This forecast remains subject to uncertainties surrounding the global economy, both on the downside and upside.

“Favourable trade negotiation outcomes, pro-growth policies in major economies, continued demand for electrical and electronic goods, and robust tourism activity could raise Malaysia’s export and growth prospects.”

The revised forecast comes as Malaysia seeks to lower US tariffs to less than 20%, after Trump increased a threatened levy on the Southeast Asian country to 25%.

The country has until Aug 1 to conclude negotiations, and is optimistic of reaching a deal.

BNM said Malaysia is facing external headwinds from a position of strength, pointing to resilience in the economy based on advanced estimates in the second quarter.

“Domestic demand will continue to support growth going forward.

“Inflationary pressure from global commodity prices is expected to remain limited, contributing to moderate domestic cost conditions.

“The impact of local policy measures is also likely to remain contained,” it said.