KUALA LUMPUR: OCBC Treasury Research has forecasted Malaysia’s gross domestic product growth to slow to 4.1 per cent year-on-year (y-o-y) in the second quarter to the fourth quarter this year (2Q-4Q 2023) from 5.6 per cent in 1Q as an external sector slowdown remained underway.
"Slowing growth alongside moderating inflation will keep Bank Negara Malaysia (BNM) on hold, in our view. BNM will, however, maintain a clear hawkish bias,” it said in a research note today.
OCBC Treasury Research said the contraction in export and import growth moderated in May to -0.7 per cent y-o-y and -3.3 per cent y-o-y from -17.6 per cent and -11.1 per cent in April, respectively.
"The improvements in the May trade data were broadly in line with our expectations (OCBC Exports: -1.1 per cent; OCBC Imports: -5.7 per cent) but well below consensus forecasts (Exports: -12.0 per cent; Imports: -11.1 per cent).
"As a result, the trade surplus widened to RM15.4 billion from RM12.6 billion in April (Consensus: RM13.4 billion; OCBC: RM17.5 billion),” it said.
OCBC Treasury Research opined that the better May trade data overstates any underlying improvements as it was impacted by the moving Hari Raya holiday effect (in April this year versus May 2022).
"In fact, the combined April/May data confirms that an external sector slowdown is underway, where export growth dropped to -9.4 per cent y-o-y in April/May from +2.8 per cent in the 1Q while import growth fell to -7.1 per cent y-o-y from +3.7 per cent in 1Q,” it said.
The drivers of May exports were broad-based, with key products including electrical and electronics, chemicals, Liquified Natural Gas and optical/scientific equipment picking up, said OCBC Treasury Research.
However, it said that the April/May average showed that export growth for key products, including palm oil (-35.3 per cent y-o-y in April/May from -17.2 per cent in 1Q), LNG (-3.1 per cent from 33.8 per cent in 1Q) and electrical and electronics (-2.6% from 3.3 per cent in 1Q) worsened versus 1Q.
"On the import front, the picture was more mixed, with import growth, classified by end-use, picked up for capital, consumer, and intermediate goods in May versus April,” it said.
OCBC Treasury Research said the combined April/May average showed that intermediate goods imports were the weakest link (-18.0 per cent y-o-y from -3.8 per cent in 1Q), more than offsetting better growth in
capital (12.5 per cent y-o-y in April/May from 0.2 per cent in 1Q) and consumer (1.5 per cent from 0.9 per cent in 1Q) goods imports.
"This suggests that there are some pockets of resilience on the domestic demand front. The upcoming six state elections are also likely to support government spending to some extent,” it added. - Bernama
