KUALA LUMPUR: Malaysia’s economy is growing steadily this year, aided by a strong pickup in exports, tourist arrivals, and robust expansion in investment activities.
Bank Negara Malaysia (BNM) governor Datuk Seri Abdul Rasheed Ghaffour said robust household spending, labour market conditions and larger policy support also supported growth.
For the second quarter of this year (Q2’24), Malaysia’s economy grew 5.9% year-on-year, slightly above the Statistics Department’s advance estimate of 5.8% released earlier.
Private consumption rose by 6%, while public consumption increased by 3.6%. Private investment climbed 12%, and public investment was 9.1% higher. Headline inflation is projected to average between 2% and 3.5% this year.
Core inflation increased to 1.9%, driven mainly by higher housing and utilities inflation of 3.1%.
Malaysia saw significant growth across various sectors, with services expanding by 5.9%, manufacturing by 4.7%, construction by 17.3%, agriculture by 7.2%, and mining by 2.7%.
“Other factors that acted as catalysts to growth were further uptick in goods exports and higher tourist arrivals as well as robust expansion in investment activities,” Abdul Rasheed told a press conference on Friday.
He said domestic spending drove growth in Q2’24, supported by sustained external demand, noting that the technology upcycle, strong tourism activities and quicker execution of existing and new investment projects could further boost growth.
“Despite expectations of moderation in private consumption due to subsidy rationalisation, spending growth has been sustained by government cash transfers, withdrawals from the Employees Provident Fund Account 3, and festive demands,” he said.
CIMB Treasury and Market Research expects growth momentum to remain robust and above 5% in the second half of 2024, raising its full-year GDP growth forecast from 4.9% to 5.2%, above the official target range of 4-5%.
The bank-backed research firm said key growth drivers are export and tourism recovery, strong approved investments and construction awards providing visibility to investments in the coming quarters, disposable income boosts from EPF Account 3 withdrawals and civil servant salary increases of 7-15% to be implemented over two phases – in December this year and January 2026.
However, disruptions to commodity production from planned maintenance and weather risks such as La Nina and the delayed impact of El Nino on crude palm oil production and the escalation of geopolitical and trade tensions are among the downside risks to the firm’s growth forecast.
UOB Global Economics & Markets Research, meanwhile, said downside risks to its growth outlook could emanate from a wider-than-expected impact of Malaysia’s fuel subsidy rationalisation, escalation in geopolitical risks (including trade protectionism) and a hard landing for the global economy amid uncertainties surrounding the US presidential election on Nov 5.
The research firm said despite higher-than-expected GDP growth in Q2’24 and upside risks to inflation, it continues to expect BNM to keep the Overnight Policy Rate unchanged at 3% for now.
“Even with the commencement of global monetary policy easing towards year-end and into 2025, the strength of Malaysia’s domestic demand does not warrant any follow-through to cut rates, while external demand is recovering, albeit bumpy,” it noted.
BNM’s Monetary Policy Committee will next meet on Sept 4-5, two weeks ahead of the US Federal Open Market Committee meeting on Sept 17-18.
