KUALA LUMPUR, 11 Nov 2022 — The Malaysian economy registered a stronger growth of 14.2% in the third quarter of 2022 (3Q 2022) compared with 8.9% posted in the second quarter of this year (2Q 2022), according to Bank Negara Malaysia (BNM).
While there were base effects from the negative growth in the third quarter of 2021, the central bank said growth was also driven by strong domestic demand, underpinned by improvements in the labour market and income conditions, as well as ongoing policy support.
“Exports remained supported by strong demand for E&E (electrical & electronics) products. The recovery of inbound tourism lent further support to economic activity. By sector, the services and manufacturing sectors continued to drive growth,” BNM said in a statement today.
According to the central bank, on a quarter-on-quarter seasonally-adjusted basis, the economy grew by 1.9% (2Q 2022: 3.5%). Overall, the Malaysian economy expanded by 9.3% in the first three quarters of 2022, BNM said.
Headline inflation is likely to have peaked for the year at 4.5% during the quarter (2Q 2022: 2.8%) while core inflation increased further to 3.7% (2Q 2022: 2.5%).
“As expected, the increase in headline inflation was largely driven by the base effect from the discount on electricity bills implemented in the third quarter of 2021, as well as sustained increases in core inflation and price-volatile items.
The inflationary pressures reflected the confluence of elevated cost pressures, particularly for food-related items, and strong demand conditions,” BNM said.
BNM said the economy will continue to expand, albeit at a more moderate pace, in the fourth quarter of 2022.
“The expected slower pace of growth reflects the more challenging global environment as well as the absence of base effects. Nevertheless, growth for the whole year of 2022 is expected to remain robust given the strong outturns in the first three quarters of the year,” the central bank said.
Looking ahead, the Malaysian economy is expected to expand by 4.0 – 5.0% in 2023, BNM said.
“The Malaysian economy will continue to be supported by firm domestic demand amid continued improvements in the labour market. Growth would also benefit from the realisation of large infrastructure projects as well as higher tourist arrivals.
However, Malaysia’s growth remains susceptible to a weaker-than-expected global growth, higher risk aversion in global financial markets, further escalation of geopolitical conflicts and re-emergence of supply chain disruptions,” Bank Negara Malaysia Governor Tan Sri Nor Shamsiah explained.
Meanwhile, according to the central bank, headline inflation is expected to moderate in the fourth quarter of 2022, but remain elevated.
BNM said the base effect from the discount on electricity bill which contributed to higher inflation in the third quarter would dissipate in the fourth quarter of 2022.
“Overall, headline inflation is expected to average 3.3% in 2022. Underlying inflation, as measured by core inflation, is expected to stay elevated for the remainder of 2022 given improving demand amid the high-cost environment,” BNM said.
Moving into 2023, headline and core inflation are expected to remain elevated amid both demand and cost pressures, as well as any changes to domestic policy measures, the central bank said.
“Additional upward pressures to inflation will remain partly contained by the existing price controls, subsidies, and the remaining spare capacity in the economy.
The balance of risk to the inflation outlook in 2023 is tilted to the upside and continues to be subject to domestic policy measures on subsidies, as well as global commodity price developments arising mainly from the ongoing military conflict in Ukraine and prolonged supply-related disruptions,” BNM added.
— Akses Malaysia
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