As 2024 has come to a close and 2025 has crept in, it seems an opportune time to sit back and reflect on the year that has passed. It was the Year of the Dragon, and in Chinese culture, that symbolises strength, power, good fortune.  

Indeed, economic figures have come in strong. Malaysia’s GDP forecast for 2024 was 4.8% according to the International Monetary Fund while BNM expected the economy to grow between 4.8% and 5.3%. Overall, the economy has expanded by 5.2% year-on-year (YoY) in the first three quarters of 2024. The government is also committed to reducing the fiscal deficit to 4.3% of GDP in 2024 from 5.0% in 2023.  

Malaysia’s trade performance has witnessed consistent growth and a trade surplus for most months. From January to November, trade grew 8.7% to RM2.621 trillion, with a trade surplus of RM117.94 billion 

Moving towards the Consumer Price Index (CPI), in term of year-to-date, both headline inflation and core inflation averaged 1.8%. The stagnant CPI reading illustrated that the impact of diesel price adjustments on broader prices has been contained due to effective mitigation measures.  

Malaysia’s labour market has remained healthy and recorded further improvement in third quarter, as the Malaysian government prioritised Micro, Small, and Medium Enterprises (MSME) to strengthen the economy and enhance the labour force by allocating a budget for programmes that promote business and entrepreneurship. This initiative led to increased participation in MSME, which in turn strengthened the labour market. During the same period, labour demand continued to be on a positive trend, while rate of unemployment declined to 3.2% since being stagnant at 3.3% in the last three preceding quarters.  

In the capital market remit, Bursa Malaysia Berhad posted a significant achievement with a total of 55 Initial Public Offerings (IPOs) being listed. This remarkable performance represents a significant 72% increase compared to the 32 IPOs recorded in 2023. Furthermore, the 55 IPOs marks the highest number of listings the Exchange has welcomed in the last 19 years. This underscores Bursa Malaysia’s growing appeal as a strategic partner for companies to raise their profile and seek capital to fuel growth and expansion. Bursa Malaysia was also ranked first among ASEAN exchanges year to date, in terms of the number of IPOs recorded and total IPO funds raised. The FBM KLCI scaled to a new high point of 1,641.73 in August, the index’s best level since December 2020, in line with improvements in regional stock indices. 

Permodalan Nasional Berhad, Malaysia’s largest investment management company, saw its asset under management growing to RM347 billion from RM337 billion recorded in 2023. Total number of accounts increased by 3.2% to 16.2 million, with its wholly owned unit trust management company, Amanah Saham Nasional Berhad (ASNB) adding more than 400,000 new unique holders to now being the preferred investment of choice of more than 13 million Malaysians. ASNB’s flagship fund, Amanah Saham Bumiputera declared a total income distribution of 5.75 cents a unit for the financial year ending 31 December 2024, which is the highest in five years. 

At the national and corporate level, 2024 has been a year of strong economic performance and for those who have save and invested, they would be able to reap the benefits of this growth.  

However, in December, the Employee Provident Fund (EPF) released its Retirement Income Adequacy framework, which highlighted the need to increase the basic retirement savings benchmark. Based on current prices, a retiree at 60 will now need RM390,000 to covering essential retirement needs; RM650,000 for a reasonable standard of living and RM1.3 million for greater financial security and independence for a higher quality of life. Yet against this, EPF’s recent data also reveals a concerning trend, with only 36% of active formal members achieving the previous basic savings level of RM240,000 by age 55, highlighting a growing retirement crisis. 

This challenge will only escalate in 2025 where many announcements will see its implementation which will augment pressures on cost of living, thus reducing one’s ability to save for the future. 

Firstly, there is the increase in insurance premiums. The cost of healthcare in Malaysia has grown significantly over the years, with medical cost inflation reaching 15% in 2024 – well above the global and Asia Pacific average of 10%. This rise is driven by factors such as advancements in medical technology and the increasing prevalence of non-communicable diseases, which have led to greater demand for healthcare services. As a result, the claims paid out by insurers and takaful operators (ITOs) have grown faster than the premiums collected. While ITOs maintain reserves to cover unexpected increases in medical claims paid, this cannot be sustained if the cost of claims continues to increase beyond reasonable estimates. Hence, periodic adjustments to medical and health insurance/takaful premiums are necessary to ensure that policyholders’ claims can continue to be met. While ITOs had proposed for 40-70% increase for 2025, BNM has stepped in to help manage the impact of these premium adjustments whereby ITOs will spread out the changes in premiums over a minimum of three years for all policyholders affected by the repricing. This measure will remain in place until the end of 2026. With this measure, at least 80% of policyholders are expected to experience yearly premium adjustments due to medical claims inflation of about 10% 

Secondly subsidies on petrol will be rationalised in July 2025. While it is meant to only affect the top 15% of the population, the possible complexity of implementation could lead to leakages and thus the government may not get the savings it forecasts which in turn hampers its ability to channel the funds to more productive uses.  Also, while the impact of diesel price adjustments on broader prices in 2024 had been contained due to effective mitigation measures, inflation in 2025 will depend on how well subsidies and price controls are managed, as well as global commodity prices and financial market trends. 

There is also the possible increase in electricity tariffs. On 26 December, Tenaga Nasional Bhd said Peninsular Malaysia’s electricity base tariff will be set to 45.62 cents per kilowatt hour in the three-year regulatory period 2025-2027, a 14.2% increase from 39.95 cents/kWh set in 2022-2024. Although Prime Minister Datuk Seri Anwar Ibrahim had later clarified that the government has not agreed to raise electricity tariffs for the public and that the ascent would only affect the affluent and profitable industries, the announcement has sparked widespread public concern. 

Nonetheless, all the above factors will increase cost of living and adversely impact one’s ability to save for retirement – thus exacerbating the retirement crisis.  

2025 will be the year of snake and in Chinese culture, it’s a time for reflection and careful decision-making. Given the possible headwinds, it is indeed critical for meticulous and well calculated evidenced-based policy making to be adopted. This will require greater research and testing of proposed solutions to minimise any unintended consequences. 

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