RECENT data on the Malaysian economy which covers close to 80% of the gross domestic product (GDP) suggests an expansion of 13.5% year-on-year (yoy) in 3Q 2022, accelerating from 8.9% yoy in 2Q 2022.
According to CGS-CIMB Research, the double-digit growth was reinforced by further recovery in tourism-related sectors amid the ongoing increase in domestic travel and international arrivals as well as from the low base effect given the lockdown in 3Q 2021.
“In addition, government intervention on administered prices and heavy subsidies had minimised erosion of household disposable income, possibly lending support to consumption growth,” opined chief economist Nazmi Idrus in an economic update.
The 3Q 2022 GDP data will be released tomorrow (Nov 11).
Besides the normalisation of economic activity, CGS-CIMB Research observed that impact from the low base effect this time was particularly strong on the yoy numbers.
“Hence, all data should show robust improvement. That said, the likely strong 3Q 2022 GDP performance will be a one-off and soften as the low base effect dissipates,” cautioned the research house.
“We expect pent-up demand to moderate as the central bank (Bank Negara Malaysia) pursues its normalisation cycle amid expectation of sustained demand-pull inflation.”
On this note, CGS-CIMB Research is projecting two 25 basis points (bps) rate hikes in 2023 to lift the overnight policy rate (OPR) to 3.25%.
“We maintain our GDP forecast at 7.3% yoy in 2022 but expect GDP growth to moderate to 5.0% in 2023,” added the research house.
Meanwhile, TA Securities Research also expects Malaysia’s 3Q 2022 GDP to be stronger than expected, “probably be around 15% yoy” which is much higher than its initial projection of 10.5% yoy.
“At the point of writing, consensus for Malaysia’s 3Q 2022 GDP growth ranges between 10.0% and 14.8% yoy with a median of 10.5% yoy,” noted economists Shazma Juliana Abu Bakar and Farid Burhanuddin.
“As we advance, Malaysia’s economic activity will remain resilient in 4Q 2022, underpinned by the improving labour market and steady domestic demand performance.”
“Nonetheless, the risk remains to the downside following more challenging environment both coming from the external and domestic side,” added the research house. – Nov 10, 2022
