- Malaysia’s 3Q22 Gross Domestic Product (GDP) beat consensus, expanded by +14.2% YoY (+1.9% QoQ). This is ahead of Bloomberg’s median forecast of +10.8%. The strong growth was underscored by continued recovery in domestic demand post pandemic, as well as base effect from a negative growth in 3Q22. With 9M22 GDP growth at +9.3%, the economy is on track to surpass Bank Negara Malaysia’s (BNM) GDP growth target of 5.3% – 6.3% this year.
- Domestic private consumption along with buoyant services sector sustained GDP growth. Private consumption expenditures remained at high levels, growing at +15.1% YoY (2Q22: +18.3% YoY). Evidently, consumer spending also improved, as reflected by an impressive +23.9% YoY jump in retail trade to RM57.7bil. Rebound in the services and manufacturing sectors were also the key drivers in the strong 3Q22 GDP’s performance.
- Local labour market outlook remains resilient, with broad-based improvement. Malaysia’s unemployment rate fell to 3.6% in September 2022, the lowest since February 2020 (3.3%), as the economy recovers from the pandemic. Notably, the sustained growth in “Own Account Workers” e.g. hawkers, petty traders etc. showed a more broad-based and equal recovery instead of specific winners in selective commodity-related sectors.
Opus’s opinion:
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4Q22 GDP expected to normalize as low base effect fades and global headwinds materialize. In line with median consensus of +4.6% YoY GDP growth for 4Q22, Malaysia’s economy is expected to grow albeit at a normalised pace, with headwinds in the form of slower global growth in 2023 as central banks worldwide continue their monetary tightening measures. In Malaysia, GDP growth in 2023 should benefit from an expansionary Budget 2023 following the completion of large infrastructure projects and several supportive measures for local Small Medium Enterprises (SMEs).
BNM to balance elevated domestic inflation with possible global slowdown in rate hike path. In view of continued Malaysian economic resilience and still elevated inflation, we expect BNM to remain on the normalisation path for the Overnight Policy Rate (OPR) with 2 more rate hikes in 1Q23, with OPR reaching 3.25%. At 3.25%, OPR will be back to preCovid levels, giving more ammunition for rate cuts if needed, in another economic slowdown.
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