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KUALA LUMPUR (Nov 17): Malaysia’s economy, as measured by gross domestic product (GDP), grew 3.3% year-on-year (y-o-y) in the third quarter of 2023 (3Q2023), driven mainly by private-sector expenditure.
Growth was slightly better than the 2.9% y-o-y growth in 2Q2023, but lower than the 5.6% y-o-y growth in 1Q2023.
Month-on-month, GDP growth moderated from 4.2% y-o-y in July to 3.2% in August, and 2.5% in September.
Quarter-on-quarter (q-o-q), GDP was higher by 2.6% in 3Q2023, faster than the 1.5% q-o-q growth recorded in 2Q2023, according to a statement from the Department of Statistics Malaysia (DOSM).
Overall, the Malaysian economy expanded by 3.9% y-o-y in the first nine months (9M2023), compared with 9.2% last year, the DOSM said.
In a separate statement, Bank Negara Malaysia (BNM) said household spending remained supported in 3Q2023 by continued growth in employment and wages, whereas investment activity was underpinned by the progress of multi-year projects and capacity expansion by firms. The economy also saw a recovery in inbound tourism.
In the statement, BNM governor Datuk Abdul Rasheed Ghaffour said the Malaysian economy is expected to grow 4% in 2023, and 4% to 5% in 2024, despite the challenging global environment.
"Growth will continue to be driven by expansion in domestic demand, amid steady employment and income prospects, particularly in domestically oriented sectors. This growth performance, along with other favourable economic developments, would provide support to the ringgit," Abdul Rasheed said.
The central bank expects improving tourist arrivals and spending, added with multi-year infrastructure project investments and other catalytic initiatives, while stronger electrical and electronics (E&E) recovery and faster project implementations could spring upside surprises.
That said, the growth outlook "remains subject to downside risks" like weaker-than-expected external demand, as well as larger and more protracted declines in commodity production.
On the inflation outlook, the central bank said it remains "highly subject" to changes to domestic policy on subsidies and price controls, aside from global commodity prices and financial market developments.
On that note, headline and core inflation is expected to further moderate, and to average 2.5% to 3% in 2023, it said.
Meanwhile, chief statistician Datuk Seri Dr Mohd Uzir Mahidin said in the DOSM's statement that household final consumption expenditure, which contributed 62.1% of GDP, grew 4.6% y-o-y in 3Q2023, but weaker by 0.7% q-o-q, compared with the 5.9% q-o-q growth recorded in 2Q2023.
Across sectors, GDP growth was supported by the improved services and construction sectors, added with a slight recovery in the agriculture sector.
The construction sector saw a y-o-y growth of 7.2% in 3Q2023, ahead of services (5%), and agriculture (0.8%).
Meanwhile, the mining and quarrying sector contracted 0.1% y-o-y, due to a higher base last year, coupled with a weaker natural gas sub-sector.
The manufacturing sector also shrank 0.1% y-o-y, due to a higher base last year and lower external demand for E&E products, and lower production of refined petroleum products.
In another development, BNM said the local currency depreciated 0.2% alongside regional currencies, amid evolving expectations for the global monetary policy path.
“However, the ringgit appreciated by 1.4% against a basket of major trading partner currencies, as indicated by the ringgit nominal effective exchange rate,” the central bank said.
On financing conditions, BNM noted that credit to the private non-financial sector grew 4.2% y-o-y, from 3.7% in 2Q2023.
This was supported by higher business loan growth of 1.6%, from 0.5% previously, mainly on improving growth in working capital loans to non-small and medium enterprises (SMEs).
It noted that SME loan growth “remained forthcoming” at 6.7% y-o-y, from 6.4% in 2Q2023, while household outstanding loans expanded 5.4%, from 5.1% previously, which BNM said reflected “steady growth across key purposes”.