KUALA LUMPUR – Malaysia’s Gross Domestic Product (GDP) is estimated to expand by 13.5 per cent year-on year (y-o-y) in the third quarter (Q3) of this year, driven by recovery in tourism-related segments as well as the low-base effect, according to stockbroking firm CGS-CIMB.
In a research note today, it said the pace of growth – an acceleration from 8.9 per cent y-o-y in the second quarter of 2022 – was suggested by recent data on the Malaysian economy that covered close to 80 per cent of GDP.
“The double-digit growth was reinforced by further recovery in tourism-related sectors amid the ongoing increase in domestic travel and international arrivals, as well as from the low-base effect given the lockdown in Q3 2021.
“In addition, government intervention on administered prices and heavy subsidies had minimised erosion of household disposable income, possibly lending support to consumption growth,” it said.
The government is scheduled to release the Q3 GDP data tomorrow.
Maintaining a 2022 GDP growth forecast of 7.3 per cent, CGS-CIMB said besides the normalisation of economic activity, the impact from the low-base effect this time was particularly strong on the y-o-y numbers; hence, all Q3 data should show robust improvement.
“That said, the likely strong Q3 2022 GDP performance will be a one-off and soften as the low base effect dissipates. We expect pent-up demand to moderate as central bank pursues its normalisation cycle amid expectation of sustained demand-pull inflation,” it said.
It forecast GDP growth to moderate to five per cent in 2023.
On the Overnight Policy Rate (OPR), CGS-CIMB projected two 25 basis points (bps) rate hikes in 2023 to lift the key rate to 3.25 per cent.
Meanwhile, MIDF Research said the strong distributive trade sales in Q3 2022 hinted at a robust GDP growth for the quarter.
It noted that Malaysia’s distributive trade sales growth of 23.9 per cent y-o-y to RM134 billion in September 2022 marked five consecutive months of double-digit expansion, bringing Q3’s growth to 32.7 per cent y-o-y for a new peak point.
By component, retail spending expanded strongly by 30 per cent y-o-y, wholesale trade was up by 13.3 per cent y-o-y and motor vehicles sales by 51 per cent y-o-y.
“The high growth rates were widely expected due to low-base effects as Malaysia faced another tight nationwide lockdown from July 2021 until September 2021,” it noted.
MIDF Research said robust domestic spending, among others, were driven by stable inflationary pressure, improving labour market and accommodative monetary as well as fiscal policies.
“Looking ahead, we opine the upbeat momentum of domestic demand to continue in 2022’s fourth quarter (Q4) and 2023 amid steady labour market, softening inflationary pressure and supportive economic policies,” it added.
On Malaysia Airports Holdings Bhd’s disclosure that total passenger movements in the country totalled 5.3 million in September this year, MIDF Research said this was about 63.7 per cent of September 2019 levels.
“Moving forward, we expect airports’ passenger movements to improve in Q4 2022 underpinned by border reopening by Japan and stay on gradual recovery mode in 2023 with harping on the reopening of China.
“The recovery towards the 2019 level is still a long journey despite the international borders reopening by Malaysia. Our house view is that the earliest for passenger traffic to reach 2019’s level is only by 2024,” it said.
MIDF Research said looking at the macro outlook and improving fundamentals, retail trade growth was projected to grow 17.6 per cent for this year as the pent-up demand would continue until end of this year, underpinned by improving labour market, stable inflationary pressure and domestic economy reopenning.
“Even though the OPR is on an upward trajectory, we believe it would have minimal effect on domestic spending,” it said, noting that the current OPR at 2.75 per cent was still below 2019’s level of 3.00 per cent.
“We believe Malaysia’s monetary policy is on a normalisation process rather than tightening path, possibly to reach the 3.00 per cent (level) by early of 2023,” it added. – Bernama