KUALA LUMPUR: The Malaysian economy expanded by 5.3% in the third quarter of 2024, driven by strong investment activity and continued improvement in exports.
The country's gross domestic product (GDP) expanded by 5.9% in the second quarter of 2024.
In its advance estimate released on October 21, the Statistics Department had projected a year-on-year growth of 5.3%, slightly surpassing the median estimate of 5.1% from a Bloomberg poll.
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Bank Negara, in a statement, said the investment activity was underpinned by strong spending on structures and machinery and equipment (M&E), while household spending sustained its expansion amid positive labour market conditions and policy support.
In the external sector, exports continued to strengthen on the back of recovering external demand and positive spillovers from the global tech upcycle.
Meanwhile, imports also grew at a faster pace, following strong demand for capital and intermediate goods to support rising investments and trade.
On the supply side, most sectors continued to support growth, with the manufacturing sector's improvement driven by export-oriented clusters.
However, growth was partly slowed by maintenance work in the mining sector. On a seasonally adjusted, quarter-on-quarter basis, growth slowed to 1.8% (2Q 2024: 2.9%).
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“Overall, the Malaysian economy expanded by 5.2% in the first three quarters of 2024,” Bank Negara said.
During the quarter, the central bank reported that both headline and core inflation remained steady at 1.9%, the same as in the previous quarter.
Inflation for diesel increased to 20.1% (2Q24: 5.3%) and vehicle insurance rose to 0.8% (2Q24: -0.1%), but these were offset by a general slowdown in inflation for food and beverages (1.6%; 2Q24: 1.9%), especially for food away from home, cereals, and fresh vegetables.
“On the whole, the share of consumer price index (CPI) items recording monthly price increases was lower at 38.9% during the quarter (2Q 2024: 49.4%),” the central bank said.
CLICK TO ENLARGEIn the third quarter of 2024, the ringgit appreciated by 14.9% against the US dollar, while the ringgit nominal effective exchange rate (NEER) also appreciated by 9.9%.
Bank Negara said this is is partly due to the US Federal Reserve shifting towards a more relaxed monetary policy, which has eased pressure on regional currencies, including the ringgit.
“However, the ringgit has since depreciated by 7.8% against the US dollar between Oct 1 and Nov 13. This was mainly driven by a stronger US dollar in the same period, amid expectations for smaller US policy rate reductions following robust US economic data,” it said.
Nevertheless, on a year-to-date basis, the ringgit appreciated by 3.1% against the US dollar (NEER: +6.6%).
“Moving forward, movements in the ringgit will continue to be influenced by external developments. Nevertheless, Malaysia’s favourable macroeconomic outlook and ongoing structural reforms would support the ringgit over the medium term.
“Bank Negara will continue to ensure the orderly functioning of the domestic foreign exchange market,” it said.
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Meanwhile, credit growth to the private non-financial sector moderated (4.8%, 2Q 2024: 5.5%), following slower growth in outstanding business loans and corporate bonds. Slower loan growth was attributed to non-SMEs, while SME loan growth remained forthcoming.
Household loan growth remained steady, supported by loans for housing and car purchases. Growth in household loan applications remained robust with sustained approval rates.
“Going forward, the growth of the Malaysian economy will be driven by robust expansion in investment activity, continued improvement in exports, and resilient household spending,” Bank Negara Governor Datuk Seri Abdul Rasheed Ghaffour said.
Domestically, investment activities will be supported by progress in multi-year projects across both the private and public sectors. Key drivers include catalytic initiatives from national master plans and a higher realisation of approved investments.
These investments, which are supported by higher capital imports, will raise exports and expand productive capacity in the economy. Household spending will be underpinned by continued employment and wage growth as well as policy measures.
Externally, the ongoing global tech upcycle, continued strong demand for manufactured goods and commodities, and higher tourist spending are expected to lift exports.
The growth outlook remains subject to downside risks stemming from slower external demand, further escalation of geopolitical tensions and protectionist measures, as well as weaker-than-expected commodity production.
Nevertheless, upside risks to growth include greater spillovers from the tech upcycle, faster implementation of investment projects and more robust tourism activity.
