Malaysia’s Labour Productivity Grows 1.0% in Q1 2025, Led by Construction and Manufacturing Sectors

Malaysia’s Labour Productivity Rises in Q1 2025 Amid Steady Economic Growth and Sectoral Resilience

Malaysia’s labour productivity per hour worked increased by 1.0% year-on-year in the first quarter of 2025, reaching RM42.50 per hour, according to the Labour Productivity Statistics for Q1 2025 released by the Department of Statistics Malaysia (DOSM). This modest but positive growth reflects the country’s ongoing recovery momentum and sectoral resilience, particularly in construction and manufacturing.

Chief Statistician Datuk Seri Dr Mohd Uzir Mahidin noted that Malaysia’s gross domestic product (GDP) expanded 4.4% in Q1 2025, down slightly from 4.9% in Q4 2024. Despite the slight deceleration, key productivity indicators continued to show improvement.

📈 Key Highlights of Malaysia’s Labour Productivity (Q1 2025)

These figures demonstrate sustained growth in output per worker and hour, a key metric for assessing Malaysia’s competitiveness and economic health.

🏗️ Construction Sector Drives Productivity Gains

Sector-wise, the construction sector was the strongest performer in Q1 2025, with labour productivity (value added per hour worked) rising a substantial 11.3%. This reflects a rebound in infrastructure projects and housing development, supported by robust public and private sector investment.

The manufacturing sector posted a 2.8% increase, driven by improvements in high-value segments such as electronics and transport equipment. The services sector, while growing more moderately, registered 0.5% growth in labour productivity per hour.

“Construction led the way in both per hour and per employment productivity metrics, signaling recovery in capital-intensive segments and continued expansion in physical development,” said Mohd Uzir.

🔍 Subsector Insights: Services Show Mixed Performance

While the overall services sector posted marginal productivity growth, performance across subsectors varied significantly.

📊 Positive Growth Subsectors:

• Real estate and business services: +6.0%

• Transportation and storage: +4.3%

• Other services: +2.8%

• Information and communication: +0.8%

• Wholesale and retail trade: +0.6%

🔻 Declining Subsectors:

• Utilities: -6.3%

• Food & beverages and accommodation: -2.5%

• Finance and insurance: -0.4%

The divergence in performance highlights evolving consumer behavior, digitization trends, and uneven post-pandemic recovery within services.

💼 Value Added per Employment: Employment Productivity Also Rises

Malaysia’s value added per employment rose by 1.3% to RM24,580 per employed person in Q1 2025, compared to RM25,635 in the previous quarter (which had posted 2.1% growth).

🔝 Sectoral Performance by Value Added per Employment:

• Construction: +13.2%

• Manufacturing: +2.2%

• Services: +0.8%

• Agriculture: +0.3%

Despite a minor decline in quarter-on-quarter value, the year-on-year increase reflects rising worker efficiency and steady business activity, especially in labour-intensive sectors.

🌍 Context and Outlook: Sustaining Momentum Amid Global Uncertainties

Malaysia’s productivity performance in early 2025 is encouraging given the backdrop of global economic headwinds, including supply chain shifts, inflationary pressures, and monetary tightening in major economies.

According to DOSM, the positive trend is underpinned by:

• Continued labour market recovery

• Expanding employment base

• Advancements in automation and digital adoption

• Ongoing infrastructure and public sector investment

“Malaysia’s labour productivity is well positioned for a resilient positive outlook,” Mohd Uzir added. “This is supported by sustainable employment, thriving business activity, and strengthening human capital.”

🧠 What This Means for Businesses and Policymakers

Labour productivity is a core metric for economic health, indicating how efficiently the workforce transforms inputs into economic value. The continued growth in Q1 2025 suggests:

• Improved operational efficiencies, particularly in high-growth sectors

• Rising worker output, which is crucial for wage growth and competitiveness

• Opportunities for targeted policy support in underperforming sectors (e.g. utilities, F&B, finance)

To maintain momentum, Malaysia must continue investing in:

• Workforce upskilling and reskilling

• Technology adoption in traditional sectors

• Sectoral transformation initiatives, especially in services and agriculture

🔮 Looking Ahead: Strengthening Human Capital for Long-Term Gains

As Malaysia moves toward becoming a high-income, digital-first economy, labour productivity will be a vital driver of inclusive and sustainable growth. Efforts to improve education outcomes, digital capabilities, and labour market flexibility will play a key role in ensuring long-term productivity gains.

The Q1 2025 data affirms that Malaysia is making tangible progress, with resilient performance across core sectors and rising efficiency in workforce contributions. For businesses, investors, and policymakers alike, labour productivity trends offer a critical lens into Malaysia’s economic readiness and future competitiveness.