UGLY impact of the very much external factor-inflicted inflation that is “still gradually climbing and has yet to peak” will likely showcase its true impact possibly three months (or a financial quarter) down the road following the so-called trickle-down effect on economic growth/consumption growth pattern.
For now, however, Maybank IB Research expects Malaysia’s gross domestic product (GDP) to post a commendable +7.7% year-on-year (yoy) rise in May 2022 (April 2022: +6.7% yoy; April-May 2022: +7.2% yoy; 1Q 2022: +5.0% yoy).
For the record, the research house’s GDP tracker is derived from May 2022’s Industrial Production Index (IPI) which moderated to +4.1% yoy (April 2022: +4.6% yoy); Distributive Trade Index (DTI) which accelerated to +14.7% yoy (April 2022: +10.0% yoy) and crude palm oil (CPO) output which fell -7.0% yoy (April 2022: -4.3% yoy).
“Real GDP growth likely strengthened further in June 2022, taking cue from the surge in Manufacturing PMI’s (Purchasing Managers’ Index) percentage yoy growth, thus signalling stronger manufacturing output growth,” projected chief economist Suhaimi Ilias and team in a monthly GDP estimate.
“Further, real GDP shrank in June-September 2021, pointing to the prospect of low-base effect boost to monthly real GDP growth in June-September 2022 (and 3Q 2022).”
Moving forward, Maybank IB Research expects Malaysia’s economic re-opening which has gone full swing to continue boosting consumer spending.
“The surge (of) growth in the weighted average of retail trade index and motor vehicle trade index of +23.7% yoy in May 2022 (April 2022: +14.5% yoy; April-May 2022: +19.0% yoy; 1Q 2022: +5.9% yoy) signals faster real private consumption expenditure (59% of 2021 real GDP) growth in 2Q 2022 after the pick-up to 5.5% yoy in 1Q 2022 (4Q 2021: +3.7% yoy),” opined the research house.
This is reflective of factors like:
- Improving job market conditions: In April-May 2022, jobless rate fell to 3.9% (1Q 2022: 4.1%); employment growth quickened to +3.4% yoy (1Q 2022: +2.9% yoy); and workers’ incomes rose as per the manufacturing wages and salaries growth of +4.7% yoy (1Q 2022: +4.1% yoy). In addition, the numbers of retrenched workers are falling, ie -48% yoy in 1H 2022 to 18,076 (1H 2021: -31.3% to 34,729; 2021: -43% to 61,630; 2020: +167% to 107,024).
- Stimulus from EPF’s special withdrawals) totalling RM40.1 bil: To note, individuals’ savings and demand deposits in April 2022 jumped +13.8% yoy (March 2022: +7.0% yoy), +7.3% month-on-month (mom) (March 2022: +1.1% mom) and +RM23.4 bil (March 2022: +RM3.6 bil) prior to “reversing” in May 2022 to +8.2% yoy, -4.9% mom and -RM16.8 bil, suggesting drawdowns for spending as well as for other purposes, including debt repayments. There is also the boost to disposable income from the extension of the option for lower workers’ EPF contribution rate of 9% vs the mandatory 11% to January-June 2022 from January-December 2021.
- Pent-up demand/spending with full economic re-opening, including lifting of international border restrictions which led to rise in domestic travel and inbound tourists as indicated by the resurgent numbers of flights and air passenger traffics for both domestic and international segments. – July 11, 2022
