Malaysia’s economic growth moderated in 4QCY22 as GDP grew slower at 7%yoy (3QCY22: +14.2%yoy). The 4Q growth met consensus expectations but was better than the estimate because of the strength in domestic demand and higher contribution from net exports said MIDF after Bank Negara released the latest economic figures.
What was obvious was domestic real spending looked robust despite concern over the rising cost of living, and the moderation in real exports was rather less than anticipate, underpinned by strong demand for E&E products and strong growth in services exports on the back of the tourism sector recovery. On a quarter-to-quarter basis, Malaysia’s GDP contracted by -2.6%qoq (3QCY22: +1.9%qoq) after adjusting to seasonal difference, dragged down by reduced spending by
both in private and public sectors; and, from the supply side, lower production in most major economic sectors except
agriculture.
For the whole of 2022, Malaysia’s GDP growth surged to +8.7% (2021: +3.7%). As the economy transitioned into the endemic phase, the relaxation of Covid-19 movement control basically allowed consumer mobility, consumer spending, and even business activities to normalize. The pent-up demand led to strong consumer spending as reflected in the double-digit growth in retail trade
As for the 2023 GDP growth forecast MIDF forecasts it to be at 4.2%. Considering external headwinds and tightening monetary policy in many economies, it foresees Malaysia’s GDP growth to moderate to +4.2% as the softer growth is mainly due to a deceleration in external trade performance, taking into account an anticipated slowdown in global demand.
MIDF said it foresees a global economic slowdown rather than a recession in 2023. Due to higher interest rates, pessimistic business sentiment as reflected in S&P Global PMI surveys, and elevated inflationary pressure, domestic demand in the US and EU will dampen this year. Malaysia’s real export growth is projected at +3% (2022: +12.8%), partially supported by improving services exports via tourism activity. As China reopens sooner than predicted, we are sanguine that this will provide an extra boost to Malaysia’s services exports as well as tourism activity.
However, it believes Malaysia’s external trade is to continue benefiting from commodity exports especially palm oil, crude
petroleum, and LNG as the prices of CPO and Brent crude oil stay elevated at RM3,500 per tonne and USD96.5pbd for 2023. Agriculture and mining sectors are projected to expand at +1% each while manufacturing output is to grow modestly by +2.7% for 2023. As for domestic sectors, construction and services are projected to expand by +4.7% and +5.5% respectively.
