On: August 23, 2023 In: Blog, Fixed Income, Knowledge Centre

Malaysia 2Q23 GDP Review

August 2023

  • Malaysia’s 2Q23 Gross Domestic Product (GDP) expanded by +2.9% YoY, moderating from the strong growth observed in 1Q23 (+5.6% YoY) and 4Q22 (+7.1% YoY). This came below the consensus forecast of +3.3% YoY and marks the country’s slowest GDP growth since 1Q2021. The drag towards the Malaysian economic growth is caused by the high base effect of the previous year’s extraordinary growth. We continue to observe the expansion of other economies in other Southeast Asian (SEA) countries led by Indonesia (+5.2% YoY), Vietnam (+4.1% YoY) and Philippines (+4.3% YoY).
  • Malaysian growth supported by resilient domestic demand. Private Consumption and Investment took the lead with a YoY growth of 4.3% (1Q22: 5.9%) and 5.1% (1Q22: 4.9%), respectively. These have largely been contributed by the broad-based spending by Malaysian consumers and an increase in the construction projects in 1HFY2023.
  • The domestic labour market remains strong, with broad-based improvement across different sectors. Malaysia’s unemployment decreased to 3.4% as of June 2023 (2Q2023: 3.5%). Employment in the services sector remained on an upward trend, mainly in food and beverage services, wholesale, and retail trade as well as transportation and storage activities.

Opus’s opinion:

  • 2H2023 GDP growth is expected to ease given the high base effect of the previous year’s extraordinary growth, in addition to the weaker-than-expected global growth, slower recovery in China’s economy and the decline in external trades.
  • OPR to stay at 3.00% for the remainder of 2023. In view of the deteriorating external environment, Malaysian GDP growth this year will have to rely on domestic consumption. As such, we expect OPR to stay at 3.00% for the rest of 2023, which is still slightly accommodative to support domestic consumption, and in turn GDP growth.
  • Having concluded the state elections, attention will now pivot directly to economic matters. The government has outlined a packed schedule to present its main economic strategies. This encompasses advancing the ‘Madani economy’ by launching the second phase of the National Energy Transition Roadmap and the National Industrial Master Plan. The revelation of the 2024 Budget is scheduled for 13 October.

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