Malaysia's economy has factors to bolster a 6% growth

KUALA LUMPUR – Malaysia’s economy has enough factors to bolster its growth, projected at 6% for this year, MIDF Amanah Investment Bank stated.

In a recently published research note, MIDF said that it is keeping the country’s gross domestic product (GDP) growth projection at 6%, almost twice the 3.1% growth that was recorded last year.

The note stated that the encouraging growth momentum for Malaysia’s economy is expected to continue through to the second half of the year (2H2022).

The investment bank explained that the country’s leading index (LI) indicated that growth momentum would continue, rebounding to positive growth in May of this year at 2.2% year-on-year (Y-o-Y) following a three-month contraction. The contraction was caused by higher real imports of other basic precious and other non-ferrous metals as businesses purchased more intermediate goods as they anticipate a better business and demand outlook.

Meanwhile, MIDF stated that the pick-up of economic activities had resulted in a faster rise of the coincident index (CI). The number recorded was 6.4% Y-o-Y, the largest growth in 12 months primarily underpinned by the stronger retail trade activity.

Additionally, the note further reports that Malaysia’s economy had also improved due to the stellar external trade performance recorded in June, with export growth accelerating as a response to stronger domestic exports while also backed by a rise in external demand for electrical and electronic (E&E) products, petroleum, palm oil, and liquefied natural gas (LNG).

Furthermore, domestic spending will continue to grow as a result of the continued recovery of the labour market, the greater mobility of the population, as well as the increasing number of tourists following the reopening of international borders, the note added.

According to the latest data, MIDF said that domestic spending activity had grown rapidly, aided by the reopening of Malaysia’s economy and the international borders. This is in spite of the growing inflation in the country.

The note said that overall, Malaysia’s price pressure had remained constant as a result of capping the retail fuel prices.

In the coming months, MIDF anticipates private consumption and the services sector to drive a stronger second quarter and the growth of 2H2022 amid the strong and solid domestic demand.

It reported that for the second quarter, the three-month moving average growth rate for the distributive trade sales was stronger at 15% Y-o-Y.

However, the investment bank cautions that there are downside risks to the growth outlook that would primarily come from external factors. It includes the slow growth in China, the ongoing Russia-Ukraine war, fluctuating global commodity prices, and the volatility of international financial markets.

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