KUALA LUMPUR (Aug 18): Malaysia's economy, as measured by gross domestic product (GDP), grew 2.9% year-on-year (y-o-y) in the second quarter this year (2Q2023), driven mainly by private-sector expenditure amid improving labour market condition, continued increase in domestic demand, and higher tourism activities.
Growth moderated from the 5.6% y-o-y growth in 1Q2023, no thanks to weaker external demand amid a global technology downcycle, lower commodity production, as well as the high base effect from 2Q2022.
GDP growth for the entire year is likely to come in at the lower end of Bank Negara Malaysia's (BNM) forecast range of 4%-5%, according to governor Datuk Shaik Abdul Rasheed Ghaffour.
“GDP growth in the second half [of 2023] would average at 3.7% to achieve the 4.0% lower-bound growth. Going forward, growth will continue due to a number of factors, [including] our strong labour condition, and progress in multi-year projects by both the private and public sectors,” he said.
“What I can say is that private consumption remains as the anchor of growth for the economy. We expect employment to grow by 2.4%, and policy measures are also in place to support those affected,” he added.
Although global growth is slowing due to elevated interest rates and declining goods trade, coupled with lower commodity production amid unfavourable weather, Abdul Rasheed said recovering tourism activities should help cushion the impact, and help Malaysia achieve the forecast GDP growth range.
On inflation, Abdul Rasheed said headline inflation is expected to average close to the lower bound of the central bank's forecasted range of 2.8%-3.8% in 2023.
“In line with the easing cost environment, headline inflation continues to trend lower in the second quarter [of 2023], averaging 2.8% for the quarter, as compared to 3.6% for the first quarter, much of this downtrend was driven by lower core inflation, which contributed around half of the decline for the second quarter.
“Core inflation moderated to 3.4% during the quarter, it was at 3.9% in the first quarter, it remains elevated relative to historical average of around 2%, therefore we need to remain vigilant.
"Lower core inflation was mainly due to lower inflation for food away from home and communication services,” he said.
Apart from core inflation, Abdul Rasheed highlighted some of the other key drivers of headline inflation this year, including the gradual subsidy rationalisation, moderating global cost environment and prevailing price controls.
“The MPC (Monetary Policy Committee) remains vigilant to ongoing developments and will continue to monitor incoming data to inform the assessment on the outlook of domestic inflation and growth," he said.