Malaysia’s Economy Expands By 5.6% On Labour Market Stability, Domestic Demand, Says DOSM

The country’s economy in the first quarter (Q1) of 2023 expanded by 5.6 per cent, a better-than-expected growth after recording a growth of 7.1 per cent in the previous quarter with the Services sector continued driving the growth upwards.

In terms of quarter-on-quarter seasonally adjusted, GDP rebounded to 0.9 per cent in Q1 2023 (Q4 2022: -1.7%). In overall for the year 2022, as Malaysia’s economy ascended to 8.7 per cent as against 3.3 per cent in the previous year.

The Department of Statistics Malaysia, in its Malaysian Economic Statistics Review (MESR), released today (May 31), cited that on the nation’s recent economic indicators, Malaysia’s Current Account Balance (CAB) recorded a surplus of RM4.3 billion in the first quarter of 2023 as compared to RM5.7 billion in the same quarter of the previous year, mainly supported by net exports of Goods account.

In terms of investment performance, Foreign Direct Investment (FDI) recorded a lower net inflow of RM12.0 billion in this quarter as compared to RM27.7 billion in the first quarter of 2022.

Direct Investment Abroad (DIA) also registered a lower net outflow of RM1.1 billion in Q1 2023 as compared to RM5.2 billion recorded in the first quarter of last year.

Meanwhile, Malaysia’s merchandise trade maintained its positive momentum in the first quarter of 2023, albeit at a slower pace, with total trade increased by 3.2 per cent to RM644.9 billion compared to RM624.8 billion in Q1 2022.

Exports rose 2.8 per cent to RM354.6 billion, while imports expanded 3.7 per cent to RM290.2 billion. The trade balance recorded a surplus of RM64.4 billion, which went down by 1.0 per cent compared to the same period last year. Looking into the performance of merchandise trade in April 2023, total trade shrank 14.5 per cent to RM198.0 billion.

Exports decreased 17.4 per cent to RM105.4 billion, and imports declined 11.1 per cent to RM92.6 billion. Meanwhile, the trade surplus fell 45.3 per cent from the previous year to RM12.8 billion.

The sales value of Manufacturing sector recorded an increase of 8.2 per cent in the first quarter of 2023 to RM449.4 billion as compared to the same period in 2022.

The sales value expanded by 8.0 per cent year-on-year in March 2023 to record RM156.2 billion. The expansion was boosted by the double-digit growth in Transport equipment & other manufactures (14.6%) and Electrical & Electronics Products (12.7%).

The Industrial Production Index (IPI) increased by 3.1 per cent in March 2023 as compared to the same month of the preceding year, supported by the increment in Manufacturing index (4.1%) and the Mining index (0.8%).

However, the Electricity index registered a negative 0.3 per cent. Meanwhile, the Services sector’s total revenue registered a growth of 13.1 per cent year-on-year to record RM560.3 billion in Q1 2023.

The Services volume index increased by 8.8 per cent to 143.9 points in this quarter. On the current labour force situation, the number of employed persons rose by 3.1 per cent (487.1 thousand persons) to record 16.06 million persons in the first quarter of 2023.

Subsequently, the employment-to-population ratio, which indicates the ability of an economy to create employment, increased by 1.1 percentage points to 67.3 per cent (Q1 2022: 66.2%).

During this quarter, the unemployment rate posted 3.5 per cent (Q4 2022: 3.6%) which portray a better outlook for the country.

From the prices perspective, the first quarter of 2023 showed an inflation rate of 3.6 per cent as compared to 2.2 per cent in the corresponding quarter of the previous year.

Meanwhile, Malaysia’s inflation in March 2023 eased to 3.4 per cent as compared to 3.7 per cent in February 2023 contributed by Restaurants & Hotels (7.2%) and Food & Non-Alcoholic Beverages (6.9%).

Nevertheless, the Transport group increased at a slower rate, which to a certain extent offset Malaysia’s inflation from continuing to rise higher as seen in April 2023 whereby the inflation rate increased at a slower rate with 3.3 per cent.

Based on these economic indicators developments, Malaysia’s economy is expected to expand at a slower pace in the near future, as indicated by the Leading Index (LI) March 2023, which declined 1.2 per cent to 110.1 points from 111.4 points in March of last year.

Real Semiconductor Imports and the Bursa Malaysia Industrial Index both experienced significant declines, which had a negative effect on LI’s performance.

Although the LI remained below the trend of 100.0 points in March 2023 at 99.3 points, it is anticipated that the economy will grow modestly in the coming months, in view of both domestic and international headwinds.

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