Kota Kinabalu: Sabah’s economic prospects remain robust despite global uncertainties and domestic challenges, said MARC Ratings Berhad Chief Economist Ray Choy See Yew during the Sabah Renewable Energy Conference (Sarec) 2025 here, on Thursday.
Presenting on the theme “Economic and Market Outlook for 2025 and Beyond”, Choy said the outlook for the year ahead remains cautious, largely due to persistent global trade tensions.
However, he assured that Malaysia’s economy, driven predominantly by domestic demand, is well-positioned to weather external shocks.
“Malaysia’s economy is essentially domestically driven. Approximately two-thirds of Gross Domestic Product (GDP) comes from internal demand, which offers a strong buffer against external shocks like trade wars,” he said.
He also underlined the strength of Malaysia’s diversified export base. While the United States (US) remains a key trade partner, no single country accounts for more than 10 percent of Malaysia’s export-to-GDP ratio — a sign of the country’s resilience in the face of global headwinds.
“Sabah’s contribution to Malaysia’s GDP, though vital, has slightly declined over the years, from 6 percent in 2013 to 5.3 percent in 2023,” he said.
Despite this dip, Choy believes Sabah has substantial growth potential, especially in light of its GDP growth of just 1.3 percent in 2023 — below the national average of 3.7 percent.
“While Sabah continues to develop, there is still ample opportunity to improve and grow its economic output,” he said.
He remarked that services, mining, and agriculture remain the backbone of the State economy, with ongoing diversification offering new pathways for development.
Choy also pointed out that Sabah’s median wage growth has outpaced the national trend — increasing from RM1,300 in 2013 to RM2,015 in 2022 — compared to the national rise from RM1,700 to RM2,424.
“Sabah’s wage growth of 5 percent per annum is above the national average of 4 percent, indicating improving living standards in the State,” Choy said.
While Sabah continues to lead the nation in palm oil production, challenges such as climate change and limited replanting have impacted output.
“However, palm oil continues to be a vital export, alongside petroleum products and natural gas, which together make up half of the State’s total exports,” he added.
Highlighting Sabah’s future, Choy spoke of transformative projects set to diversify and stimulate the local economy — particularly in renewable energy, infrastructure, and agriculture.
“Key projects include Seguntor Bioenergy Sdn Bhd (RM80 million to RM120 million) and the Tadau Energy Solar Farm, Malaysia’s first green sukuk-financed renewable energy initiative, valued at RM250 million.
“Renewable energy projects are central to Sabah’s growth and offer exciting prospects for long-term economic stability,” he said.
He also emphasised the strategic importance of major infrastructure initiatives such as the RM40 billion Pan Borneo Highway and the RM7.5 billion Sabah-Sarawak Link Road (SSLR).
“These infrastructure projects are pivotal for Sabah’s future economic growth,” he said, adding that enhanced transportation networks will strengthen both local and regional development.
Nationally, Choy projected a 4.4 percent GDP growth for Malaysia in this year, supported by stable inflation, steady foreign direct investment in semiconductors and data infrastructure and a resilient financial market.
On the global front, he forecast 2.8 percent economic growth for the year, with inflation expected to ease. However, he warned that US tariffs and changing global trade dynamics could still pose risks — particularly for Asean economies.
“Trade war dynamics are constantly evolving and US tariffs could shift the economic landscape,” he said.
Despite such challenges, he believed that Malaysia’s diversified economy and Sabah’s untapped potential will continue to support sustainable growth.
“Malaysia’s economy benefits from diversified export markets and a resilient domestic economy,” he said.
He asserted that Sabah has ample room to grow and with the right investment and policy framework, the State could play an even larger role in Malaysia’s economic future.
