The final estimate of 3Q GDP growth showed that the economy grew 3.3% YoY from 2.9% in 2Q23 (Consensus: 3.2%; OCBC: 3.5%). The estimate OCBC was unchanged relative to the flash estimate. On a sequential basis, GDP growth grew 2.6% QoQ sa from 1.5% in 2Q23.
GDP growth in the agriculture, mining and manufacturing sectors was left unchanged relative to the advance estimates. However, growth in the construction sector was revised higher to 7.2% YoY (advance estimate: 5.8%) which was offset by slower growth in the services sector of 5.0% (advance estimate: 5.1%).
On the demand-side, private sector growth was steady at 4.5% YoY in 3Q23 versus 2Q23. Private consumption expenditure growth improved marginally to 4.6% YoY from 4.3% in 2Q while investment growth slowed to 4.5% YoY from 5.1% in 2Q23. Meanwhile, public sector spending improved to 6.2%YoY from 4.6% in 2Q23 led by consumption spending. As a result, domestic final demand contribution improved to 4.5 percentage points (pp) from 4.2pp in 2Q23.
Net exports shaved off 1.4pp in 3Q23 versus -0.1pp in 2Q23. This was mainly due to significantly weaker export growth of -12%YoY versus -9.4% in 2Q23. Import growth slowed to a lesser extent reflecting more resilient domestic demand conditions.
GDP growth averaged 3.9%YoY in 1Q-3Q23 and we expect it will continue to improve in 4Q23 boosting full year 2023 growth to 4.0%. Our forecast is for GDP growth to pick up further to 4.2% in 2024 supported by resilient wage growth, a continued focus on infrastructure spending and bottoming of the electronics export downcycle.
…Stable Current Account Surplus
OCBS said the weakness in 3Q23 GDP was mirrored in the current account balance. The current account surplus remained stable at MYR9.1bn (2.0% of GDP) in 3Q23 and the details showed a wider goods trade and narrower services deficit in 3Q23 versus 2Q23, however, goods export and import growth continued to contract quite sharply. The primary income deficit have been volatile and widened further in 3Q23, but was offset by a narrower secondary income deficit.
Meanwhile, the financial account balance shifted to a surplus of MYR14.9bn despite larger net portfolio and FDI outflows in 3Q23 versus 2Q23. Net ‘other investments’ moved to a surplus of MYR34.6bn versus a deficit of MYR15.1bn in 2Q23. The basic balance balance (net FDI +current account) surplus narrowed further to MYR3.0bn from MYR4.2bn in 2Q23, the lowest since 2Q18
Notwithstanding, with the external balances remaining stable, GDP growth momentum improving and inflation remaining benign (albeit subject to energy subsidy policy changes in 2024), OCBC continues to expect BNM to remain on a prolonged hold through next year.
