KUALA LUMPUR (May 12): Malaysia’s economy, as measured by gross domestic product (GDP), grew 5.6% year-on-year (y-o-y) in the first quarter of 2023 (1Q2023), driven by further expansion of household spending, strong growth in employment as well as continued expansion, which have supported private consumption spending.
Investment activity was underpinned by capacity expansion and continued implementation of multi-year projects, while inbound tourism continued to recover, lifting services exports and partially offsetting the slower goods export growth, according to Bank Negara Malaysia (BNM) in a statement on Friday (May 12).
On a quarter-on-quarter seasonally adjusted basis, the Malaysian economy grew by 0.9% (compared with a 1.7% contraction in 4Q2022).
Despite global headwinds, the Malaysian economy is projected to expand by 4% to 5% in 2023, driven by firm domestic demand, improving employment and income as well as continued implementation of multi-year projects that would support consumption and investment activity.
“Recent indicators suggest that the economy is on a firm track to expand between 4% and 5% in 2023, Malaysia is not at risk of recession,” said BNM governor Tan Sri Nor Shamsiah Mohd Yunus at a press conference.
“The labour market continued to strengthen in 1Q2023 and is expected to remain supportive of domestic demand. The economy will approach full employment by the end of this year,” said Nor Shamsiah.
According to the BNM governor, risks to the country’s growth outlook are relatively balanced.
“These include stronger-than-expected tourism activity and implementation of projects including those from the re-tabled Budget 2023. Meanwhile, downside risks could emanate from lower exports due to weaker-than-expected global growth and more volatile global financial market conditions,” she added.
Financing conditions
Credit to the private non-financial sector expanded by 4.2% in 1Q2023, compared with 4.7% in 4Q2022, accounted mainly by slower growth in outstanding loans and outstanding corporate bonds.
Outstanding business loans grew by 2.4%, following slower growth in working capital loans, said BNM.
“Nonetheless, investment-related loans remained forthcoming, especially in the small and medium enterprise (SME) segment.
“For households, outstanding loan growth expanded by 5.2%. This was supported by sustained growth in outstanding loans for the purchase of big-ticket items, with higher growth recorded particularly for car purchases,” it added.
Ringgit performance remains stable
Against the backdrop of the US dollar and risks arising from banking sector stress in the US and Europe, the ringgit continued to show two-way movements with an overall marginal appreciation of 0.1% against the US dollar in 1Q2023, according to Nor Shamsiah.
"The ringgit's performance remained broadly stable as the currency started the year on an appreciation trend," she said.
"Going forward, BNM will continue to closely monitor global and domestic financial conditions while ensuring orderly adjustment in financial markets," she added, without giving a forecast for the ringgit's performance through the end of the year.