Malaysia’s economy grows faster than expected in Q3 on domestic demand
Malaysia's economy grows faster than expected in Q3 on domestic ... Reuters
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Sustainable Development Goals (SDGs) in Malaysia’s Economic Growth
KUALA LUMPUR, Nov 17 (Reuters)
Malaysia’s economy grew faster than expected in the third quarter, with the central bank expecting buoyant domestic demand to continue offsetting a slowdown in exports.
Gross Domestic Product (GDP) Expansion
- Data from Bank Negara Malaysia (BNM) and the Statistics Department showed that Malaysia’s GDP expanded 3.3% from a year earlier in the July-September period.
- This growth rate beat analysts’ estimates for a 3% expansion and recovered from a near two-year low of 2.9% in the second quarter.
- The reading was in line with advance estimates released on Oct. 20.
Government’s Target and Economic Fundamentals
- Malaysia’s economic growth is expected to meet the government’s target of 4% this year.
- This growth is driven by strong domestic spending, improving labor market conditions, and rising tourism, according to BNM Governor Abdul Rasheed Ghaffour.
- “Malaysia’s economic fundamentals remain strong and supportive of growth moving forward,” he said, adding that GDP had exceeded pre-pandemic levels.
Future Growth Projection
The government estimates the economy will expand by between 4% to 5% in 2024.
Challenges and Recovery
- The Southeast Asian economy has faced sharply slower growth this year after a 22-year high of 8.7% in 2022, amid weaker international demand.
- Malaysia, a major global supplier of palm oil and semiconductors, saw exports decline 12% in the third quarter.
- However, the central bank expects a recovery amid a pickup in the tech cycle next year.
Monetary Policy and Inflation
- The central bank held its key interest rate unchanged at 3.00% earlier this month amid moderating inflation.
- Abdul Rasheed warned of risks due to weaker-than-expected external demand and declines in commodity production.
- Headline inflation came in at 2% in the third quarter and is expected to remain modest going into next year.
Currency Strength
Abdul Rasheed downplayed concerns about the ringgit currency, which has fallen around 6% against the U.S. dollar this year.
He stated that the ringgit does not reflect the strength of the economy and believes that it will reflect the underlying strong fundamentals in the longer run.
Economist’s Perspective
- Mohd Afzanizam Abdul Rashid, chief economist at Bank Muamalat Malaysia, said the economy “still had room to grow”.
- He mentioned that tourist arrivals have yet to reach pre-pandemic levels and the technology sector has been negative this year but is expected to improve in 2024.
- Overall, he believes that the growth projection of 4% to 5% for next year is an attainable target.
Reporting by Rozanna Latiff; Editing by Kim Coghill
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