THE Malaysian economy is expected to post stronger growth in 1Q 2022 underpinned by stronger performance in the services sector amid further easing of restrictions.
Based on the latest economic indicators, Hong Leong Investment Bank (HLIB) Research expects the country’s 1Q 2022 gross domestic product (GDP) to expand by +4.7% year-on-year (yoy) which is higher than the consensus median forecast of +4.0% yoy (4Q 2021: +3.6% yoy).
Bank Negara Malaysia (BNM) will announce the 1Q 2022 GDP later today.
“We expect an acceleration in services sector growth consistent with the volume index of services (+7.1% yoy; 4Q 2021: +3.0% yoy), mainly driven by improvements in wholesale & retail trade, food & beverages (F&B), accommodation and transportation & storage subsectors as tourism activities picked up,” projected economist Felicia Ling and team in an economic update.
“Manufacturing production remained on an uptrend albeit at a more modest pace (+6.3% yoy; 4Q 2021: +9.2% yoy).”
Moving forward, HLIB Research expects growth to continue its positive trajectory in 2022.
Consumption activity is anticipated to pick up further with full re-opening of economic activity as Malaysia transitions to endemicity alongside higher disposable income with the EPF special withdrawal scheme and minimum wage hike.
“Nevertheless, the outlook remains susceptible to risks of slower-than-expected global growth, worsening supply chain disruptions and geopolitical tensions,” cautioned the research house.
“We maintain our 2022 GDP forecast at 5.5% and for BNM to raise OPR (overnight policy rate) by another 50 basis points (bps) during July and September’s MPC (Monetary Policy Committee) meetings on expectations of continued recovery in Malaysia’s economy.”
Meanwhile, TA Securities Research expects Malaysia’s 1Q 2022 GDP to be stronger- than- expected at 4.9% which is much higher than its initial projection of 3.3% yoy growth.
“This is line with the optimistic view by BNM in its recent monetary policy statement over the economic performance and outlook,” justified economists Shazma Juliana Abu Bakar and Farid Burhanuddin.
“Despite the upward revision on 1Q 2022, we are still maintaining our full-year GDP growth target of 6% yoy in 2022 (2021: 3.1% yoy). Risks, however, remain on the downside.
“This is also after considering the recent interest rate hike by BNM (25bps) and anticipation of another 25bps rate hike in 2H 2022 which may pose some risks to our consumption forecast.” – May 13, 2022
