Malaysia’s economy grows at fastest pace in over a year, outpaces regional peers

Central bank governor Nor Shamsiah Yunus said third quarter growth was driven by expansion in domestic demand. PHOTO: EPA-EFE

KUALA LUMPUR - Malaysia’s economy grew at its fastest pace in over a year in the third quarter, outpacing the growth rate in many of its South-east Asian peers, but the central bank said the outlook was clouded by the risk of a global slowdown.

Gross domestic product rose 14.2 per cent in the July to September period from a year earlier, the fastest pace since the second quarter of 2021 and the first double-digit growth in over a year.

Growth came in above the 11.7 per cent growth forecast in a Reuters poll and the 8.9 per cent annual rise in the previous quarter, the central bank said. It expected growth to outpace the government’s projection for a 6.5 to 7 per cent expansion in 2022.

The jump in the third quarter was driven by a continued expansion in domestic demand, a firm recovery in the labour market, solid exports, and ongoing policy support, central bank governor Nor Shamsiah Yunus told a news conference on Friday.

It surpassed third-quarter growth in many of its regional peers, including Indonesia, the Philippines, Singapore and Vietnam.

But Bank Negara Malaysia (BNM) said the outlook was clouded by the risk of a global economic slowdown, forecasting economic growth to slow to 4 per cent to 5 per cent in 2023. Major central banks have embarked on some of the most aggressive rounds of rate rises in decades to curb inflation, risking a downturn in the global economy.

“We acknowledge there are still some spots in our economy that have yet to return to pre-pandemic condition,” Ms Nor Shamsiah said. “The moderation in global growth will particularly have an impact on Malaysia’s exports.”

Headline inflation likely peaked at 4.5 per cent in the third quarter and is expected to moderate thereafter, but it will remain elevated, BNM said.

Inflation in Malaysia has been largely contained by record government subsidies and price control measures in 2022, but upside risks remain, with the central bank delivering its fourth consecutive 25-basis-point rate hike last week. Since May, BNM has raised rates by a total of 100 basis points from a historic low of 1.75 per cent, in a bid to temper inflation.

The rate hikes come as the ringgit has fallen 10.8 per cent against the US dollar in 2022, with the greenback supported by the Federal Reserve’s aggressive monetary tightening.

Ms Nor Shamsiah said the ringgit currency will adjust to reflect Malaysia’s economic fundamentals once uncertainties caused by the United States’ rate moves recede, without elaborating further.

“Malaysia is not in an economic crisis,” she said, adding that the country will not see a recession in 2023. REUTERS

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