On: November 20, 2023 In: Blog, Fixed Income, Knowledge Centre

Malaysia 3Q23 GDP Review

November 2023

  • Malaysia’s 3Q23 Gross Domestic Product (GDP) rose by 3.3% YoY (2Q23: 2.9% YoY), outperforming market consensus of 2.8% YoY. This marks Malaysia’s fastest quarterly growth since the start of 2023 by +2.6% QoQ (2Q23: +1.5% QoQ; 1Q23: +0.9% QoQ). Similarly, strong growth is observed amongst the regional peers, led by the Philippines growing by +5.9% YoY, Vietnam by +5.3% YoY and Indonesia by +4.9% YoY.
  • Domestic demand remains key to sustaining the country’s GDP growth as external trade continues to weaken. Domestic demand remains stable, growing by +4.8% YoY driven by the faster growth in consumer spending on necessities and discretionary items. In addition, the public sector had also grown at a faster pace by 6.2% (2Q23: +4.6% YoY) in 3Q23 driven by government spending on supplies and services. This notwithstanding, net exports plunged by -22.7% YoY (2Q23: -3.7% YoY), following two quarters of negative trade data, due to the slowdown in the global economy.
  • Strong labour market conditions will continue to support domestic consumption, with broad-based improvement across various sectors. Malaysia’s unemployment rate declines further in 3Q23 to 3.4% (2Q23: 3.5%). Notably, the services sector saw a continued increase in employment, with growth recorded across the wholesale & retail trade, food & beverage services, and administrative & support service activities subsectors.

Opus’s opinion:

  • Going forward, the growth of the Malaysian economy will continue to be driven by the resilient domestic demand. Household spending will continue to be supported by the strong labour market and steady employment and wage growth. Additionally, the progress of multi-year infrastructure projects and implementation of new government initiatives will be the growth catalysts moving forward.
  • Headline and core inflation to remain moderate for the remainder of 2023. Subsidy rationalisation and removal of price controls will see an impact on our existing subdued inflation (September Headline: 1.9% Core: 2.5%). However, the magnitude will depend on the pace of implementation by our government notwithstanding any global price volatility risk.
  • OPR is expected to stay at 3.00% for extended period. GDP growth for 2023 is expected to be at 4%, while for 2024, Bank Negara projected GDP growth to be at 4% – 5%, underpin by domestic consumption, recovery in tourism sector as well as stronger exports on the electrical and electronics (E&E) sector. However, slowdown in the global economy, higher financing cost and impact of subsidy rationalisation are downside risk to growth projection. With global rates expected to remain high for longer, we expect OPR to remain at 3% for an extended period, possibly throughout 2024.

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