Malaysia’s economy grows faster than expected in Q3 on domestic demand

KUALA LUMPUR – 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) expanded 3.3 per cent from a year earlier in the July-September period, data from Bank Negara Malaysia (BNM) and the Statistics Department showed on Nov 17, beating analysts’ estimates for a 3 per cent expansion and recovering from a near two-year low of 2.9 per cent in the second quarter.

The reading was in line with advance estimates released on Oct 20.

Malaysia’s economic growth is expected to meet the government’s target of 4 per cent in 2023, driven by strong domestic spending, improving labour market conditions and rising tourism, BNM governor Abdul Rasheed Ghaffour told reporters.

“Malaysia’s economic fundamentals remain strong and supportive of growth moving forward,” he said, adding that GDP had exceeded pre-pandemic levels.

The government estimates the economy will expand by between 4 per cent and 5 per cent in 2024.

The Malaysian economy has faced sharply slower growth in 2023 after a 22-year high of 8.7 per cent in 2022, amid weaker international demand.

The South-east Asian nation, a major global supplier of palm oil and semiconductors, saw exports decline 12 per cent in the third quarter, though the central bank expects a recovery amid a pickup in the tech cycle in 2024.

The central bank

held its key interest rate unchanged at 3 per cent earlier in November

amid moderating inflation, and warned of risks due to weaker-than-expected external demand and declines in commodity production.

Headline inflation came in at 2 per cent in the third quarter, and is expected to remain modest going into 2024, Datuk Abdul Rasheed said.

He downplayed

concerns about the ringgit,

which has fallen around 6 per cent against the US dollar in 2023, one of the weakest performers in the region, saying it did not reflect strength in the economy.

“In the longer run, we believe that the ringgit will reflect the underlying fundamentals that have been quite strong,” Mr Abdul Rasheed said.

Bank Muamalat Malaysia chief economist Mohd Afzanizam Abdul Rashid said the economy “still had room to grow”.

“Tourist arrivals have yet to reach the pre-pandemic levels and the technology sector has been negative this year, but it is expected to improve in 2024,” he said. “All in all, I think next year’s growth projection of 4 per cent to 5 per cent is an attainable target.” REUTERS