KUALA LUMPUR: Malaysia's economy grew 7% in the fourth quarter of 2022, slightly under half the double-digit growth of 14.2% in the previous quarter, amid the waning impact of stimulus measures and the low-base effect.
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Bank Negara said private sector activity remained the key driver of growth, supported by private consumption and investment.
"The continued growth in private consumption was mainly driven by improving labour market conditions," said the central bank in a statement.
Comparatively, the fourth-quarter economic growth of 7% outpaced the 6.6% median forecast of a Reuters survey of 21 economists, which had submitted estimates ranging from 5.2% to 10.5%.
On a quarter-on-quarter seasonally adjusted basis, gross domestic product (GDP) was down 2.6%.
For the entire 2022, Malaysia's GDP expanded 8.7% as compared to 3.1% in 2021.
Meanwhile, Bank Negara said overall export growth moderated in line with the weaker external demand, although this was partly offset by the resilient performance in exports of electrical and electronic (E&E) products and higher tourism activities.
It added that the services and manufacturing sectors continued to drive growth.
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Headline inflation moderated to 3.9% in the fourth quarter, mainly owing to the lapse in the base effect on electricity inflation.
"The moderating trend in key global commodity prices partly led to lower inflation in some Consumer Price Index (CPI) items, including fuel.
"Inflation for some key staple food items, such as fresh meat and eggs, also moderated during the quarter," said the central bank.
However, the downward impact of these factors was partly offset by higher core inflation, which rose 4.2%, on sustained demand amid an elevated cost environment.
Over the course of 2022, headline inflation increased to 3.3% and core inflation averaged higher at 3%.
Moving forward, the Malaysian economy is expected to expand at a more moderate pace in 2023 amid a challenging external environment.
Bank Negara said domestic demand will continue to drive growth, supported by the continued recovery in the labour market and the realisation of multi-year investment projects.
It added that the services and manufacturing sectors will also continue to support growth.
Meanwhile, the slowdown in exports following weaker global demand would be partially cushioned by higher tourism activity.
"The balance of risks remains tilted to the downside, mainly from weaker global growth, tighter financial conditions, re-escalation of geopolitical conflicts and worsening supply chain disruptions," it said.
Headline and core inflation are expected to moderate but remain elevated in 2023 amid lingering cost and demand pressures.
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"Core inflation is expected to remain elevated in the near term, in part due to the low base in the first half of 2022.
"Existing price controls and fuel subsidies, and the remaining spare capacity in the economy, will continue to partly contain the extent of upward pressures to inflation," said Bank Negara.
The central bank added that the inflation outlook remains highly subject to any changes to domestic policy, as well as global commodity price developments.
