OCBC is revising its growth forecast for Malaysia’s GDP for 2022, from 5.7% previously to now 6.9%. The uptick it said is largely predicated on the Q3 GDP outturn, which came in at 14.2%, compared to the expectation of 12.5%.
The details from the latest GDP release signal that the concerns about consumption slowdown due to the relatively high household debt level and depletion of EPF statutory retirement funds, may remain well within the gestation period and may not be manifesting clearly in the near term yet.
At 15.1% yoy, the bank notes that the private consumption growth did slow down somewhat in Q3, compared to the 18.3% growth posted in the prior quarter. However, there remained considerable strength, which is helped in part by the country’s still-robust employment. The unemployment rate dipped further to 3.7% in Q3 2022, a full percentage point lower than the same period in 2021, for one.
Elsewhere, OCBC noted Malaysia’s growth has been supported by continued strength in the exports sector, as well. Even as it remains cautious of the potential headwinds posed by the global semiconductor sector’s slowdown, Malaysia’s external sector has seen robust outturn still, with a growth of 23.9% in Q3 compared to 10.4% in the prior quarter.
However, on the likelihood that inflation concerns may remain dominant in 2023 especially if subsidies are rationalised further, the bank sees a rising risk that Bank Negara may have more compulsion for rate hikes.
Set against the relatively strong economic backdrop, it sees a tweaking of ate up to 3.25% in Q1 next year, rather than 3.0% as per before. In other words, it is thus likely to hike by 25bps each of the Jan and Mar 2023 meetings.
While the near-term growth looks rosy enough, Malaysia is unlikely to be unscathed in any sharp global slowdown that may be seen in the coming year. Hence OCBC is revising its 2023 growth outlook to 4.4% from 4.6% which is below Bank Negara’s 5% forecast.