UOB Global Economics and Markets Research estimates Malaysia’s GDP to grow at 6.3% in the fourth quarter of 2022 (4Q22) which is higher than its preliminary forecast of 5.5%.

The growth, it said, is mainly due to the reopening of the country’s economy and borders, continued government subsidies and cash aids, as well as year-ago low base effects.

This will bring the country’s 2022 GDP growth to 8.5%, up from its preliminary forecast of 8.3% and 3.1% in 2021, it said in a note today.

Malaysia is expected to release its actual 4Q22 GDP numbers on Feb 10, 2023.

Although Malaysia’s real GDP growth should continue to surpass its pre-pandemic historical average of 4.9% for a fourth straight quarter in 4Q22, it noted that it will be slowing down from 14.2% in the preceding quarter.

“On a seasonally adjusted quarter-to-quarter (QoQ) basis, we project real GDP to contract for the first time since 3Q21 by 1.6% (Bloomberg estimate: -2.1%, 3Q22: +1.9%),” it said. 

This, it said, mainly reflects the fading effects of pent-up demand post reopening, as well as subdued global demand as a result of aggressive global monetary policy tightening and prolonged Covid-induced lockdown in China.

It said that the potential QoQ contraction would justify the surprise decision by Bank Negara Malaysia (BNM) to hold interest rates unchanged on Jan 19, 2023, whereby the central bank cited a need to assess the impact of cumulative four back-to-back rate hikes between May 2022 and November 2022 on the economy.

In 4Q22, the research unit said all sectors are expected to post a positive annual expansion led by services, manufacturing, and mining and quarrying industries.

On the aggregate demand side, it said, domestic demand is projected to remain resilient even as households were still hit by high living costs and rising interest rates, providing support to overall GDP last quarter.

Private consumption growth is projected to hold up at 10.5% compared to 15.1% in 3Q22 on the back of persistent government support and higher employment, it said.

It also anticipates private investment to recover further while government expenditure is set to be lifted by continued cash assistance, subsidy bills and election-related expenses.

Meanwhile, external demand is anticipated to soften on account of subdued global demand, which is also expected to trigger stock withdrawal activities in the quarter. 

For 2023, UOB Research said it will continue to expect Malaysia’s growth momentum to moderate further to 4% from an estimated 8.5% in 2022.

“The overall outlook remains subject to downside risks, including more restrictive global monetary policy settings as a result of still high inflationary pressures and strong labour markets, an escalation of geopolitical tensions, weaker-than-expected global demand, and ongoing global tech downcycle,” it said. — TMR / pic Hussein Shaharuddin