Malaysia’s economic growth accelerated slightly to +3.3%yoy in 3QCY22, (2QCY23: +2.9%yoy), similar to the advance estimate. The full-quarter growth is similar to expectation but somewhat higher than market consensus (+3%yoy) said analysts at MIDF.
The moderate below-4% growth reflects the continued drag from weak external demand; while the sustained positive growth was anchored by the continued rise in domestic demand, thanks to growing spending activities on the back of positive job market conditions with more people getting employed. In addition, the tourism sector recovery, with increased tourist arrivals and spending, also contributed to the growth in domestic spending. Although the trade surplus widened to RM18.7b (2QCY23: RM13.9b), much lower (-22.7%yoy) than the surplus in 3Q last year, contributing a larger downward drag of -1.4ppt to the 3QCY23 growth (2QCY23: -0.1ppt). If we exclude the drag from external trade, the economy could’ve grown
more than +4.5%yoy due to larger contribution from domestic demand (3QCY23: +4.7ppt; 2QCY23: +3.0ppt).
On a quarter-to-quarter basis, Malaysia’s GDP grew robustly by +2.6%qoq (2QCY23: +1.5%qoq) after seasonal adjustment, marking the third straight quarter of quarterly growth and the strongest 5 quarters mainly attributable to higher government spending (+4.6%qoq) and fixed investment (+1.8%qoq) which offset the decline in private consumption (-0.7%qoq). Looking at 4QCY23, MIDF expects the growth momentum to pick up on the back of improving external demand and continued expansion in domestic demand.
The house maintains its 2023 GDP growth forecast at 4.2%. Although Malaysia’s growth averaged at +3.9%yoy in the first 3-quarter 2023, MIDF maintained its projection that the economy will grow at +4.2% for the full-year 2023 underpinned by the recovery in external trade from 4QCY23 onwards. Analysts at MIDF also expect Malaysia’s economic growth to pick up next year as the assumption is trade recovery will continue, driven by a pick-up in demand for E&E products and semiconductors (as discussed in our thematic report). In addition, the positive employment and income growth, including cash assistance from the government, will support domestic spending to continue growing next year.
However, the House views inflation risk mainly because of planned policy changes by the government as the key downside risk to household spending, which has been one of the main concerns affecting consumer sentiment. Moreover, other developments like geopolitical and trade tensions, volatility in the financial markets, slowdown in the US economy, and fragility of China’s economic recovery are among downside risks that could also derail Malaysia’s growth outlook.
