Malaysian Economy Grew Faster by +3.3%yoy in Q3

The Malaysian economy grew faster but is still below-trend despite being faster than the previous quarter, says MIDF. According to the advance estimate which is based on Jul-23 and Aug-23 data, Malaysia’s economy grew faster by +3.3%yoy in 3QCY23 (2QCY23: +2.9%yoy).

The growth momentum, however, is still moderate, remaining below +4%. Based on the sector breakdown, the stronger growth was underpinned by more robust expansion in the services sector.

Although the advance estimate did not come with the demand side breakdown, we believe the services sector growth was supported by growing domestic spending and recovery in tourist arrivals. Construction sector also contributed positively to the third quarter growth, although the sector’s growth rate moderated to +5.8%yoy (2QCY23: +6.2%yoy).

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Malaysian Economy Growth

Agriculture sector recorded better growth, rebounding to +0.8%yoy (2QCY23: -1.1%yoy). Mining & quarrying sector growth, on the other hand, was nearly unchanged from a year ago, falling at slower pace of -0.1%yoy (2QCY23: -2.3%yoy). In line with the external slowdown, manufacturing sector registered a marginal contraction of -0.1%yoy, the first negative growth after 7 quarters of expansion. Strength in domestic demand will be key. The sustainability of growth in the domestic economy will be the key driver to growth.

“We expect consumer spending to continue supporting the GDP growth in 3QCY23 and the coming quarters. This will be backed the positive labour market conditions, with more people entered the job market and positive employment growth. In addition, the tourism sector recovery, particular the recovery in foreign tourist arrivals, will also support domestic spending.

Core Inflation Unchanged

“This shall be positive for sectors such as retail trade and accommodation. Inflation and cost of living will affect sentiment. Easing inflation, which moderated further to +1.9% in Sep- 23, would be supportive of spending outlook,” says MIDF.

However, core inflation, which was unchanged at +2.5%yoy, remained above headline inflation and this signalled sticky underlying demand pressures on prices. In other words, we expect consumers will be cautious to make big spending in view of the overall rise in cost of living, and some may also express concerns about the economy in view of moderate growth momentum.

The recent rise in prices of food items, such as fresh seafood, eggs and rice, will also hurt consumer sentiment and discretionary spending on other goods and services. Come back to Business News to get more on the Malaysian economy.