Malaysia’s economic growth misses estimate

GDP grew 3.4% in the October-December period from a year ago 

MALAYSIA’S economy grew at a slower-than-estimated pace in the fourth quarter as exports to China fell, signalling that a firmer recovery is taking longer than expected. 

GDP grew 3.4% in the October-December period from a year ago, according to advance estimates released by Malaysia’s Department of Statistics (DoSM) last Friday. That’s lower than the 4.1% median estimate in a Bloomberg survey. 

A slowdown in construction and stagnant manufacturing activity weighed on the economy, which grew 3.8% all of last year, below the central bank’s estimate of about 4% expansion in 2023. The final figures will be released on Feb 16. 

Malaysia is grappling with falling exports that have been dragged by China’s sputtering economy. Shipments of goods abroad fell 10% from a year earlier in December, the Ministry of International Trade and Industry (MITI) separately reported last Friday, with sales to China, its largest trading partner, shrinking 1.5%. 

“Weak external demand has been the main reason for slowing growth in 2023. The slowing Chinese economy certainly plays a role,” said Dr Mohd Afzanizam Abdul Rashid, the chief economist at Bank Muamalat Malaysia Bhd. “2024 is still on cautious mode”. 

Malaysia’s ringgit pared earlier gains to trade little changed at 4.7207 against the dollar at 1:46pm local time following the disappointing data. 

Malaysia’s growth trajectory for 2024 is still fraught with risks both externally and at home. While Prime Minister (PM) Anwar Ibrahim has dismissed alleged plots to bring down his administration, concerns over political stability prevail as he seeks to execute business-friendly plans while reducing government debt. 

“Renewed political instability that creates more hurdles for bold policy reforms and restoring market confidence would be key threats on the local front,” said analysts at BIMB Securities Sdn Bhd ahead of last Friday’s data. 

On the external front, a potential fallout in the Middle East crisis, over-restrictive global monetary policy conditions and financial contagion fears especially from China also pose risks to the domestic economy, they said. Still, BIMB Securities expect the benchmark interest rate to remain anchored at 3% through 2024, with continued focus on the balance of risk between Malaysia’s growth and inflation outlook. 

The market will closely watch Bank Negara Malaysia’s (BNM) statement at the monetary policy meeting this week for clues on the path of interest rates. The BNM will likely keep its key rate steady for a fourth straight meeting on Jan 24, according to all nine economists surveyed by Bloomberg so far. The Overnight Policy Rate (OPR) is at a record discount relative to the Federal Reserve’s (Fed) rate. — Bloomberg


  • This article first appeared in The Malaysian Reserve weekly print edition