Malaysia’s economy exceeded expectations in the first quarter of the year, bolstered by robust domestic demand, according to data released by the central bank and government. Gross domestic product (GDP) expanded by a solid 5.6 percent, surpassing the 4.8 percent growth forecast predicted by analysts in a Reuters poll.
Further Reading:
The impressive growth rate follows a previous quarter where the economy recorded a growth of 7.1 percent, revised up from the initial announcement of 7.0 percent. Last year, Malaysia achieved an exceptional growth rate of 8.7 percent, rebounding from the pandemic-induced slump. However, concerns loom over the outlook for the export-oriented Southeast Asian economy due to cooling global demand.
Malaysia’s central bank remains optimistic, stating that robust domestic demand will continue to be the driving force behind economic expansion. Consequently, they maintain their growth forecast for 2023 between 4 percent and 5 percent. The country’s quarterly expansion can be attributed to improved labor market conditions, ongoing large infrastructure projects, and a recovery in the tourism sector.
BNM Governor Nor Shamsiah Mohd Yunus expressed confidence in the country’s economic strength, emphasizing that Malaysia is no longer in a crisis. However, she acknowledged that risks to the growth outlook are balanced, with external factors posing potential downside risks. Persistent risks to inflation were also noted. Following a recent surprise 25-basis-point interest rate hike, the central bank did not rule out the possibility of further normalizing the benchmark interest rate, citing evolving global developments.
Looking ahead, BNM anticipates inflation to moderate but remain elevated throughout 2023. The projected average for headline inflation this year is between 2.8 percent and 3.8 percent, compared to 3.3 percent in 2022.
Malaysia’s impressive first-quarter performance underscores the country’s resilience and recovery from the pandemic-induced challenges. The strong growth rate, driven by solid domestic demand, showcases the effectiveness of ongoing infrastructure projects, improved labor market conditions, and a rebound in tourism. As the economy gains strength, the central bank remains watchful of external factors and inflation risks.
The country’s ability to outperform forecasts in Q1 has instilled confidence in Malaysia’s economic trajectory. With continued focus on domestic demand and ongoing measures to address potential risks, Malaysia is poised for sustained growth and stability in the coming months.
External Links: