UOB Research revise Malaysia’s 2022 GDP to 8.3%

UOB Research revised Malaysia’s 2022 full-year real GDP growth estimate up to 8.3% from 6.5% previously after the economy expanded 9.3% in the first nine months of this year.

“Our new GDP growth forecast for the entire year of 2022 will mark the strongest since 2000,” it said in a research note today. 

The much stronger than initially expected economic expansion, it said, suggests a possible upward revision in the government’s growth target for 2022 from the current target of 6.5%-7% when the new government re-tables a budget proposal for 2023 post the 15th general election (GE15).

“Favourable base effects, full reopening of economic and social activities as well as country’s borders, continued government subsidies and higher national monthly minimum wages are the main factors propelling Malaysia’s GDP growth this year, amid strong global demand,” it noted.

However, UOB Research believes that these positive effects on the domestic economy are expected to wane in 2023.

“A confluence of more challenging external factors — geopolitical conflicts, elevated global inflation pressures, tighter central bank policy and global liquidity, rising financial volatility, China’s Covid-19 zero policy, and global tech downcycle — will further weigh on both global and domestic growth momentum next year,” it said.

“As such, we maintain our growth outlook for the next year with a moderate real GDP expansion of 4% (official estimate: 4%-5%),” it said.

UOB Research said a 4.0% GDP growth projection for Malaysia next year also came after taking into account mild recessions in the US, European Union and the UK; a sensible growth rebound in China and Hong Kong; as well as softer growth for the rest of the Asian nations in 2023. 

Malaysia’s third-quarter (3Q) economy surprised on the upside with real GDP growth accelerating further to 14.2% from 8.9% in the preceding quarter.

It was the strongest gain since 2Q21, beating UOB Research estimate of 13.6% and Bloomberg consensus of 12.5%.

The exceptional results made Malaysia the best performer in the region for two straight quarters, ahead of Vietnam’s real GDP growth of 13.7%, the Philippines’ 7.6% and Indonesia’s 5.7%.

On a monthly basis, real GDP expanded by 15.8% in July, 15.3% in August and 11.6% in September after hitting a peak of 16.5% in June. 

On a seasonally adjusted basis, the Malaysian economy grew more than expected by 1.9% in 3Q22. In absolute terms, the seasonally adjusted GDP of RM386.1 billion continued to surpass the pre-pandemic level in 4Q19 of RM354.5 billion for the third straight quarter.

“This signified a solid economic recovery pace and justified Bank Negara Malaysia’s fourth back-to-back interest-rate hike last Thursday (Nov 3),” said the research house.

The outperformance of the3Q22 GDP was credited to favourable base effects, the ongoing transition to endemicity since April this year, continued government subsidies, higher national monthly minimum wages and strong global demand for Malaysia’s electrical and electronic products. 

This led to a robust improvement in both domestic and external demand amid modest stock replenishment activities last quarter. All economic sectors also logged respectable growth, led by services, manufacturing and construction sectors. — TMR / pic by TMR FILE