KUALA LUMPUR – BMI, a Fitch Solutions company, has raised the forecast for Malaysia’s real gross domestic product (GDP) growth to 4.2% in this year from 4.0% previously following the better-than-expected 5.6% expansion in the first quarter (Q1).
The research company said Malaysia’s Q1 performance was well above the consensus and its own expectations of 4.8%.
“However, the picture is by no means upbeat. The latest (growth) figure still corresponds to a sharp slowdown, from 7.1% in Q4 2022.
“On a seasonally adjusted basis, the 0.9% quarter-on-quarter rebound is nowhere large enough to reverse the contraction of 1.7% in Q4 last year,’’ it said in its outlook report for Malaysia today.
BMI also expects private consumption to grow by 5% this year, easing significantly from 11.3% in 2022 due to a decline in household savings and tighter monetary conditions.
It believes the economic boost received in the second half of 2022 stemming from base effects and pent-up demand following the easing of Covid-19 restrictions has eased and households have since drawn down their savings significantly since April last year.
“More recently, Prime Minister Datuk Seri Anwar Ibrahim announced that Employee Provident Fund withdrawals, which were previously allowed during the pandemic, are no longer permitted.
“Along with Bank Negara Malaysia’s cumulative 125 basis points hike since 2022, we expect private consumption to slow further in the coming quarters,” the research house added.
BMI said the impact of high borrowing costs will also be felt by businesses, which underpins its forecast for investment growth to slow to 2.3% of GDP in 2023 from 7.5% in 2022.
The business landscape also remained challenging as Malaysia’s manufacturing purchasing managers’ Index came in at 48.8 in April, marking the eighth consecutive month in which the reading has stayed below the 50.0 mark that separates contraction from expansion.
In addition, the business tendency survey has remained below 2022 levels and suggests that sentiment remains weak.
As for exports, BMI forecasts growth “to slow to 1% in 2023 from 12.8% in 2022 amid a slowdown in the global economy.”
“Indeed, our global team is forecasting global economic growth to ease from 3.1% in 2022 to 2.1% in 2023.
“On the upside, we believe that the semiconductor industry may start to bottom out in the second half based on past cycles, while the reopening of the Chinese economy should bode well for Malaysia’s tourism sector,” it said.
Overall, BMI said a stronger-than-expected economic rebound stemming from China would bode well for Malaysia’s export-oriented economy since the economy is Malaysia’s second-largest export destination, accounting for nearly 13% of total outbound shipments. – Bernama, May 16, 2023
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