Malaysia’s economy growing at decent rate: Economist

PETALING JAYA: Malaysia’s economy is growing at a decent rate of 5.6%, said Bank Muamalat Malaysia Bank chief economist Dr Afzanizam Abdul Rashid.

“Both engines – domestic demand and net exports – grew by 4.6% and 54.4% respectively. BNM expects the economy to reach full employment status this year, which means spending among households will continue to hold up. Nonetheless, the inflation rate is expected to stay elevated,” he told SunBiz when commenting on the announcement of Malaysia’s economic performance by Bank Negara Malaysia (BNM) governor Tan Sri Nor Shamsiah Mohd Yunus recently.

Malaysia’s economy recorded a better-than-expected expansion of 5.6% in the first quarter of 2023 (Q1’23) driven mainly by private sector expenditure.

Nor Shamsiah said growth in Q1’23 was supported by further expansion of household spending, continued investment activity, improving labour market and higher tourism activities.

“The labour market continued to strengthen in the first quarter of 2023 and is expected to remain supportive of domestic demand. The whole economy is no longer in crisis and, in fact, continues to gain strength,” she said when announcing the Malaysian economy’s first-quarter performance.

Meanwhile, investment activity was underpinned by capacity expansion and continued implementation of multi-year projects. In addition, Inbound tourism continued to recover, lifting services exports and partially offsetting the slower goods export growth.

The central bank said Malaysia’s growth is expected to remain resilient in 2023, anchored by firm domestic demand. Despite global headwinds, the Malaysian economy is projected to expand by 4.0% to 5.0% in 2023, driven by firm domestic demand.

Improving employment and income as well as continued implementation of multi-year projects would support consumption and investment activity. Moreover, higher inbound tourism activity would lift high-touch services industries.

Nor Shamsiah said, “Risks to Malaysia’s growth outlook are relatively balanced. Upside risks stem mainly from domestic factors. These include stronger-than expected tourism activity and implementation of projects including those from the re-tabled Budget 2023. Meanwhile, downside risks could emanate from lower exports due to weaker-than-expected global growth and more volatile global financial market conditions.”

On this, Afzanizam said, “The upside risks would stem from global commodity prices, imported inflation from weak ringgit, strong demand from China and larger revision to subsidies and price cap policies. To a large degree, the recent OPR hike was appropriately justified as the growth trajectory has normalised.

“In a nutshell, the Malaysian economy is on track to achieve GDP (gross domestic product) growth of 4% to 5% this year. As for the OPR, I think there is no urgency to raise it further as it has reached a level that is consistent with the growth trajectory. And BNM has built a comfortable policy space for them to response to future shocks. So on the OPR, I see it should stay at 3% throughout the year.”

Meanwhile, Professor Geoffrey Williams from Malaysian University of Science and Technology (MUST) told SunBiz that GDP in Q1’23 was lower at RM380.9 billion compared with RM398 billion in the previous quarter.

“This is a fall of 4.3% and we only get the positive headline figures after various adjustments and rebalancing of inventories which give growth of 0.9% compared with contraction of 1.7% last time. This is also affected by a revision in the statistics.

“So although the headline figures appear positive on an annual basis, behind the headlines we see a slowing economy consistent with the view that growth is returning to more moderate levels.”

Williams said that across all areas of production, growth was slower and across all areas of expenditure, it was also slower. “In fact the impact of government spending has fallen following the excessive pre-election spending under the previous finance minister.”

He added that export and import growth was negative so the impact of external demand remains a concern and is not adding as much as might be hoped from the reopening of China, for example. The net contribution of trade fell significantly.

“This puts more emphasis on domestic demand from consumers and domestic investment but the higher OPR will impact both of those in the coming months. We can already see that seasonally adjusted investment contracted 1.4% reflecting hikes in the OPR and also sluggish global demand,” he highlighted.

He also said the full year GDP might come in at the lower end of the 4% to 5% projected by BNM.

from Highlights https://ift.tt/A9gCpf6
via IFTTT