Meanwhile, Malaysia's economy remains resilient, bolstered by the electronics sector, though concerns about inflation and weaker domestic consumption linger. In Singapore, strong manufacturing growth, particularly in electronics, continues to drive economic activity, but high interest rates and subdued domestic consumption pose challenges for the near future. This report explores the key economic indicators and projections for each country as they move toward 2025.

Mainland China

China: Policy coordination to cushion, but not avert, the expected downturn

• Third-quarter GDP grew by 4.6% y/y, a moderation from Q2’s 4.7% y/y pace.
• Price growth data, such as the GDP deflator and producer prices, imply deflationary risks .
• Policy support lifted recent data prints, but it’s unlikely to reverse the structural downturn.

In Q3, China’s GDP slowed to 4.6% y/y from Q2’s 4.7%. China’s growth in 2024 is led by exports, with GDP data for the past three quarters showing real double-digit export growth. However, there are challenges for the domestic sector, including weak consumer sentiment and a sinking property market. Furthermore, it’s likely that export growth will moderate in 2025, though there are some upside risks from more US fiscal policy supporting demand for Chinese goods, and front-loading orders given tariff risks.

Furthermore, there appears to be ongoing deflationary pressures. The GDP deflator – a broad measure of prices across the economy – was negative for the sixth consecutive quarter. Other measures of price growth were also poor: core inflation was close to flat at 0.2% y/y in October, and producer prices had contracted once more by 2.9% y/y.

Hence, the last few months have seen increased intervention from the central authorities to support the Chinese economy. The People’s Bank of China had announced a basket of policy support measures in September. The policy rate was cut by 20bps to 1.5%, while the reserve ratio requirement was cut by 50bps. They had also set up a facility of CNY500bn to provide additional liquidity through a swap line when purchasing equities. By historical standards, these moves are aggressive.

The fiscal side soon followed, though they haven’t been substantial. The most notable thrust is the restructuring of implicit local government debt, to transfer some of these off-budget debts, including those incurred by local government financial vehicles, onto local governments’ balance sheets. Total interest payments could be lowered by CNY600bn during this period. While light, it’s likely that concrete plans to increase government spending will only be approved at the next meeting of the National People’s Congress in March. The authorities have suggested that more intervention is on the cards.

Meanwhile, there are modest signs of a pick up. Retail sales grew by 4.8% y/y, the fastest pace in eight months, supported by the consumer trade-in programme for equipment and consumer products as well as policy support for EV purchases. Prices of newly built and second-hand homes in Tier 1 cities turned positive on a m/m basis, with some top Tier 2 cities also showing an uptick.

But this doesn’t mean the downturn is behind us. Deflationary risks linger, while funding to the property sector continued to contract in annual terms. The main hurdle to a sustainable recovery in private consumption remains how to support employment and improve the income outlook. For 2025, Oxford Economics expects China’s GDP growth to be 4.4% y/y, slower than the expected 4.8% pace in 2024.

Malaysia

Malaysia: Electronics drive the economy as domestic consumers are slow to return

• Economic activity remained robust in Q3, with GDP growing by 5.3% y/y.
• The electronics cycle has been the key tailwind, but the boost is set to moderate in 2025.
• Inflationary risks and currency pressure suggest the policy rate will buck the easing cycle.

Economic momentum continues to be elevated despite some slowdown in Q3. The annual pace of growth moderated to 5.3% y/y in Q3 from Q2’s 5.8%. The main tailwind has been the ongoing upturn in the electronics cycle, which boosted investment growth from the private sector as well as export growth.

The robust investment growth seen in Q3 – a strong 15.3% y/y – possibly reflects still-elevated optimism among private businesses, particularly foreign ones. For 2024, investment is set to grow by about 12%. The last time investment data was at least this strong was in 2012. While government projects and residential developments remain in the pipeline, plans by major chip firms to expand or set up shop in Malaysia form the bulk of investment. Although, investment growth will probably be more modest in 2025 after the initial capital outlay, given the threat of tariffs from a second Trump presidency.

After a stellar H1, consumer spending appears to have come off the boil in Q3, expanding by 4.8% y/y from last quarter’s 6% y/y. With most of the tourism recovery already over, the boost seen earlier in the year is likely to fade. Fiscal tightening will remain a drag on consumption decisions. The much-anticipated withdrawal of subsidies from petroleum may fuel inflation and constrain discretionary spending too.

However, there are signs that consumer purchasing power is improving. Job market indicators point to some labour market tightening. Earnings growth has turned positive and unemployment remains low. The usual lags suggest expansion plans by major semiconductor-related companies will start to prop up real incomes from the turn of the year. Private consumption growth should only be mildly better in 2025.

External tailwinds are still blowing in the near term. GDP data show real exports accelerated to 11.8% y/y in Q3, up from Q2’s 8.4%. Electronics exports were the main engine thanks to the upturn in the global electronics cycle. In contrast, exports excluding electronics have been largely flat since 2023. Our forecast of expansionary US fiscal policy point to some upside for global demand in 2025. But that will be offset by cautious consumers in other advanced economies, and there are early signs that the electronics cycle will lose momentum. As such, export growth will probably remain supportive, but not transformative, in 2025.

Pressure on the ringgit was briefly alleviated in Q3, but has reversed much of those gains amid US dollar strengthening since the start of October. The recent jump in the US Treasury 10-yr yields, along with the possibility of more US tariffs, implies that the dollar may be stronger for longer. Although inflation is at 1.8% in September, the government's 2025 fiscal plans point to inflation rising to roughly 2.8% by Q1 2026. As such, we do not foresee any changes to the policy rate by Bank Negara Malaysia in 2025.

Singapore

Singapore: Robust manufacturing set to continue driving economic activity

• GDP growth in Q3 was 5.4% y/y, higher than last quarter’s 3%.
• There are few tailwinds outside of the electronics cluster.
• Domestic consumption could be weighed down by elevated interest rates and buoyant outbound tourism.

Singapore’s GDP grew by 5.4% y/y in Q3 as economic momentum picked up significantly. The main driver was manufacturing, which grew by 11% y/y, significantly higher than a 1.1% contraction in Q2. Growth in service-sector activity picked up but remained relatively soft, while construction growth weakened. Overall, the pace of growth should moderate somewhat following the initial boost.

The main tailwind is strong global electronics demand, which currently supports Singapore’s domestic exports. Domestically produced electronic products grew by 17% y/y last quarter. Monthly industrial production data suggest that there is still scope for gains, too. While non-oil domestic exports contracted by 7.4% y/y in October, much of that was due to the volatile pharmaceutical component. Export volumes are still above their 2022 average, when exports were last at their strongest, and remain on an uptrend.

Exports will probably continue to be supported by the ongoing upturn in the tech cycle in 2025, albeit at a more measured pace. However, our forecast of only a slight uptick in global growth to 2.8% y/y in 2025 from 2.7% this year is consistent with modest export growth. Given that business investments tend to follow exports, any scope for investment gains would not be massive.

Services exports growth had tempered in Q3 to 4.8% y/y, a moderation from Q2’s 9.4%. This partly reflects softer growth in foreign arrivals which rose to about 86% of their 2019 level in Q3 from 82% in Q2. While arrivals are set to recover, the boost is likely to moderate even more.

Domestic spending will likely ease in Q4 before picking up again in 2025. Private consumption was 6.9% y/y in Q3, up from the 6.2% observed in Q2. Increased outbound travel which probably weigh on the Q4 numbers. Furthermore, even though domestic interest rates have started falling, they are likely to remain elevated, given our view of fewer cuts to US policy rate following Trump’s re-election. This will likely weigh on high-value purchasing decisions. That said, the electronics upswing will be a counterbalance as it feeds through to other parts of the economy and boosts income growth. On balance, we forecast private consumption to grow 2.5% y/y in 2025 from 6.1% this year.