ANN/THE STRAITS TIMES – Malaysia’s economy expanded faster than initially estimated in the first quarter, driven by private spending and a rebound in exports.
Gross domestic product (GDP) quickened 4.2 per cent in the January-March period, said Malaysia’s central bank and statistics department in a joint briefing yesterday. That is higher than the 3.9 per cent advance estimate, as well as the median forecast in a Bloomberg survey. On a quarter-on-quarter basis, the economy grew 1.4 per cent from the previous three months.
While strong services sector and manufacturing output helped drive the economy, a better than previously expected out-turn in farm and construction segments contributed to lifting overall growth.
Forward-looking indicators point to continued growth for the Malaysian economy, Bank Negara Malaysia governor Abdul Rasheed Ghaffour said in the briefing in Kuala Lumpur. He expects consumer spending to improve, aided by higher income levels, sound balance sheets and support from the government.
Malaysia’s economic outlook for 2024 looks brighter after tepid global demand caused growth to moderate in 2023. A sustained recovery in China – its largest trading partner – could help the Malaysia’s manufacturing sector and boost tourist arrivals as well as investment. Bank Negara Malaysia expects GDP to expand between four per cent and five per cent this year on improving external demand.
The risk of slowing domestic spending, a key growth driver, also looks to be fading.
Malaysian Prime Minister Anwar Ibrahim indicated on May 14 that he was in no rush to cut fuel subsidies on concerns that it would spur price pressures and strain consumption. The central bank anticipates that inflation, which had been below two per cent since September, may average as much as 3.5 per cent in 2024 should subsidies be phased out.
The first-quarter report suggests that Malaysia’s economic expansion is set to accelerate to 4.2 per cent this year, from 3.7 per cent in 2023, according to OCBC Bank.
“Resilient growth prospects amid benign inflationary pressures will allow Bank Negara Malaysia to keep its policy rate unchanged in 2024,” said senior Asean economist at OCBC in Singapore Lavanya Venkateswaran. “The key risk to our forecasts is from the timing and mechanism regarding the introduction of targeted fuel subsidies.”
Malaysia’s central bank has been encouraging state-linked firms and investment funds, as well as private companies and exporters, to repatriate foreign investment income and convert it into the local currency to buoy the ringgit, after it slid to a 26-year low in February.
The coordinated moves have led to more consistent flows into Malaysia’s foreign exchange market and helped cushion the pressure on the ringgit, Bank Negara Malaysia said. The daily average foreign exchange market trading volume rose to USD17.6 billion from February 26 through May 15, compared with USD15 billion in the preceding period this year, according to the central bank.
The ringgit is among the best performers in Asia in May, even as expectations grow that the United States (US) Federal Reserve may keep borrowing costs elevated for longer. The ringgit was little changed at 4.6845 against the US dollar as at 12.43pm yesterday, holding a 1.2 per cent gain from this week.
