Five brokerages polled by StarBiz put Malaysia's gross domestic product growth by at least 5% during the first quarter of 2023, higher than the Bloomberg consensus estimate of 4.8%.
PETALING JAYA: Despite a decelerating trend, Malaysia’s economy is expected to have remained robust for the first three months of this year, supported by resilient domestic spending.
According to the five brokerages polled by StarBiz, gross domestic product (GDP) have likely grown by at least 5% during the first quarter of 2023 (1Q23), higher than the Bloomberg consensus estimate of 4.8%.
Nevertheless, this represented a slowdown from the 7% growth achieved in 4Q22.
Overall, economists expected the country’s GDP numbers to continue trending down through 2023.
Bank Negara is slated to unveil the country’s 1Q23 GDP numbers today.
CGS-CIMB Research and Maybank Investment Bank (Maybank IB) Research projected a GDP growth of 5.7% for 1Q23, while TA Research’s estimate was at 5.6%.
Hong Leong Investment Bank (HLIB) Research’s 1Q23 GDP growth forecast stood at 5.2%, while that of UOB Global Economics and Markets Research was at 5%.
“We estimate Malaysia’s GDP expanded by 5.7% in 1Q23, supported by a strong services sector and improvements in the labour market,” CGS-CIMB Research explained.
“From our perspective, the likely solid 1Q23 GDP performance, as well as expectations of further labour market recovery, could have been the triggers behind an earlier-than expected rate hike by Bank Negara, which resumed its monetary tightening cycle last week,” the brokerage said.
It said the central bank had noted that consumption and investment activities were resilient, while improvement in tourist arrivals would further boost tourism-related activities.
Maybank IB Research pointed out that the lower 1Q23 growth seen in industrial production Index, volume of services index and construction works value besides the drop in crude palm oil (CPO) output formed the basis of its expectations of a slower 1Q23 GDP growth compared with 4Q22.
“The downward trend in GDP growth likely persisted into 2Q23, taking cue from manufacturing purchasing managers index, which dropped 5.4% year-on-year (y-o-y) in April 2023 after declining 1.6% y-o-y in March 2023, portending further softening in manufacturing output, as well as the continued slump in CPO output of 18.2% y-o-y last month compared with a decline of 8.7% in March 2023,” it said.
As such, Maybank IB Research expected 2023 GDP growth to decelerate to 4% from 8.7% in 2022.
TA Research pointed out that despite a deceleration in 1Q GDP performance, the services sector remained significant and robust, with a projected growth of 7.4% in 1Q23, as compared to 8.9% in 4Q22.
“Notably, the services sector in real GDP exhibited an exceptional correlation of 99.6% with the volume index of services from the first quarter of 2018 to the fourth quarter of 2022, further affirming its pivotal role.
“In 2022, the services sector constituted 58.2% of the nation’s GDP,” TA Research said.
“We hold the belief that the 1Q23 GDP growth rate will fall within our projected expectation of 5.6%. We maintain our 2023 GDP growth forecast of 4.6%,” it added.
HLIB Research said the 1Q23 GDP growth could be weighed down by moderations across the board.
“On the demand side, Malaysia’s private consumption is expected to remain the key driver of growth, underpinned by the steady improvement in the labour market where unemployment has continued to trend downwards,” it said.
“Despite the better labour market situation, private consumption is still expected to slow its pace as cost pressures continue to weigh on spending. This is reflected by the softer retail sales posting for the quarter,” it added.
HLIB Research said the country’s pace of economic expansion was expected to continue moderating in the quarters ahead in the absence of base effect and pent-up demand.
“Tighter global credit conditions, weaker global growth and inflationary pressures also continue to pose significant headwinds to trade activity and growth,” it said.
HLIB Research maintained its 2023 GDP growth projection at 4%.
UOB said domestic demand would have support GDP growth amid softer external demand and persistent stock withdrawal activities during 1Q23.
“While elevated cost of living and higher interest rates have started to bite on consumer spending, the continuation of government cash aids and subsidies amid improving labour market conditions are seen helping private consumption growth to avert a faster slowdown,” it said.
“We see signs of further slowdown in domestic economic activities particularly post the Hari Raya Aidilfitri celebrations. This is in spite of potential changes in some domestic policies relating to subsidies and prices that are expected to be rationalised in the second half (2H) of 2023,” it added.
UOB said the changes would post more upside pressure for consumer price inflation, living costs and business operating costs in 2H23 should they materialise, and subsequently dent consumption.
The group maintained its 2023 GDP growth forecast at 4% for now.
