KUALA LUMPUR, 12 May 2023 — The Malaysian economy further expanded by 5.6 per cent in the first quarter of 2023, driven mainly by domestic demand, Bank Negara Malaysia (BNM) said.
In a statement today, the central bank said further improvement in the labor market, with strong growth in employment and continued expansion in wages, have supported private consumption spending.
“Meanwhile, investment activity was underpinned by capacity expansion and continued implementation of multi-year projects. Inbound tourism continued to recover, lifting services exports and partially offsetting the slower goods export growth.
On the supply side, the services and manufacturing sectors continued to drive growth,” BNM said.
According to the central bank, on a quarter-on-quarter seasonally-adjusted basis, the economy grew by 0.9 per cent (4Q 2022: -1.7 per cent).
BNM said headline inflation during the quarter trended lower to 3.6 per cent (4Q 2022: 3.9 per cent) due mainly to the moderation in core inflation and lower RON97 price.
“The decline in core inflation (1Q 2023: 3.9 per cent; 4Q 2022: 4.2 per cent) was largely contributed by selected services which included telephone and telefax service, food away from home, and personal transport repair and maintenance,” the central bank said.
BNM also said that domestic financial conditions remained broadly stable despite uncertainties surrounding the global economic outlook.
According to the central bank, and financial market expectations for US monetary policy were affected by evolving concerns over the US economy and these include the pace of disinflation and sustainability of its economic momentum.
“By the end of the quarter, risks from banking sector stress in the US and Europe weighed further on these expectations. As a result, the US dollar broadly depreciated amid shifting sentiments surrounding these developments, reversing its appreciation gains during first half of the quarter,” it said.
Against this backdrop, BNM said the ringgit continued to exhibit two-way movements with an overall marginal appreciation of 0.1 per cent against the US dollar during the quarter.
Moving forward, Bank Negara Malaysia will continue to closely monitor the global and domestic financial conditions while ensuring orderly financial market adjustments.
Meanwhile, credit to the private non-financial sector expanded by 4.2 per cent (4Q 2022: 4.7 per cent), accounted mainly by slower growth in outstanding loans (1Q 2023: 4.7 per cent; 4Q 2022: 5.7 per cent) and outstanding corporate bonds (1Q 2023: 4.4 per cent, 4Q 2022: 4.6 per cent).
BNM said outstanding business loans grew by 2.4 per cent, following slower growth in working capital loans. Nonetheless, investment-related loans remained forthcoming, especially in the small medium-sized enterprise segment.
“For households, outstanding loan growth expanded by 5.2 per cent supported by sustained growth in outstanding loans for the purchase of big-ticket items, with higher growth recorded particularly for car purchases,” the central bank said.
BNM said despite global headwinds, the Malaysian economy is projected to expand by 4.0 to 5.0 per cent in 2023, driven by firm domestic demand.
“Improving employment and income as well as continued implementation of multi-year projects would support consumption and investment activity. Moreover, higher inbound tourism activity would lift high-touch services industries,” the central bank said.
Governor Tan Sri Nor Shamsiah Mohd Yunus said that risks to Malaysia’s growth outlook are relatively balanced.
“Upside risks stem mainly from domestic factors. These include stronger-than- expected tourism activity and implementation of projects including those from the re-tabled Budget 2023.
Meanwhile, downside risks could emanate from lower exports due to weaker-than-expected global growth and more volatile global financial market conditions,” she said.
Headline and core inflation are expected to moderate but would remain above historical average in 2023, the central bank said.
“The moderation reflects lower global cost factors amid easing supply chain disruptions and lower commodity prices. However, core inflation will remain at elevated levels amid firm demand conditions.
Existing price controls and fuel subsidies will continue to partly contain the extent of upward inflationary pressures,” BNM said.
The balance of risk to the inflation outlook is tilted to the upside and remains highly subject to any changes in domestic policy, financial market developments and global commodity prices, BNM added.
— Akses Malaysia
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