Economy Malaysia: 14.2% GDP growth for Q3 2022. Super high, good or just okay?

Economy Malaysia: 14.2% GDP growth for Q3 2022. Super high, good or just okay?

GDP growth is always a comparison yeah. Then only we know whether it’s up or down

GDP growth number is always a comparison with the same period a year ago. Thus, a high number for Q3 2022 may also because of a low or negative number for Q3 2021. Nevertheless, please do not take away from the fact that a growing economy is still a growing economy and to look into details as to where the growth is coming from. Thus, if I am to rate the Q3 2022 growth, we cannot say this is super high because it was a comparison. It cannot be just okay because in comparison to countries around the region, this is definitely very encouraging indeed.

Let’s exceed the 2022 GDP predictions for economy Malaysia!

So, in my opinion, this is a good set of numbers for Q3 2022 and I do think we will exceed the projections for the full year growth which was projected earlier. Iinternational Monetary Fund (IMF) says Malaysia will grow by 5.4% for 2022. Let’s see if I am right okay. Do read the full Press Release from BNM for our latest set of numbers for Q3 2022. It includes the inflation numbers and also what’s helping this growth in GDP too.

Press Release from Bank Negara Malaysia. (Click here to view in BNM site)

Stronger expansion of 14.2% in the third quarter (2Q 2022: 8.9%)

The Malaysian economy registered a stronger growth of 14.2% in the third quarter of 2022 (2Q 2022: 8.9%). While there were base effects from the negative growth in the third quarter of 2021, growth was also driven by strong domestic demand, underpinned by improvements in labour market and income conditions, as well as ongoing policy support. Exports remained supported by strong demand for E&E products. The recovery of inbound tourism lent further support to economic activity.  By sector, the services and manufacturing sectors continued to drive growth. On a quarter-on-quarter seasonally-adjusted basis, the economy grew by 1.9% (2Q 2022: 3.5%). Overall, the Malaysian economy expanded by 9.3% in the first three quarters of 2022.

Headline inflation is likely to have peaked for the year at 4.5% during the quarter (2Q 2022: 2.8%) while core inflation increased further to 3.7% (2Q 2022: 2.5%). As expected, the increase in headline inflation was largely driven by the base effect from the discount on electricity bill implemented in the third quarter of 2021, as well as sustained increases in core inflation and price-volatile items. The inflationary pressures reflected the confluence of elevated cost pressures, particularly for food-related items, and strong demand conditions.

Exchange rate developments

The ringgit depreciated by 4.9% against the US dollar in the third quarter of 2022 (YTD until 9 November 2022: -11.2%), in line with regional currencies which depreciated by an average of 5.5% (YTD: -9.5%). This reflected the continued strengthening of the US dollar amid further monetary policy tightening by the US Federal Reserve and higher investor risk aversion due to moderating global growth prospects. Nonetheless, strong domestic growth mitigated further downward external pressures on the ringgit. Moving forward, although domestic financial markets may face the risk of higher volatility, spillovers to domestic financial intermediation are expected to remain contained, supported by Malaysia’s healthy external position and well-capitalised banking system. The Bank will continue to closely monitor market developments and ensure that adjustments remain orderly to support effective intermediation for the economy.

Financing conditions

Net financing to the private sector grew by 5.4% (2Q 2022: 4.9%) supported mainly by higher outstanding loan growth (6.1%; 2Q 2022: 5.4%), driven by the household segment. Meanwhile, outstanding corporate bond growth remained sustained at 3.5% (2Q 2022: 3.4%). Outstanding business loan growth stood at 5.0%, as the growth in loan repayments outpaced that of loan disbursements. Loan applications remained forthcoming across segments and most loan purposes. For households, outstanding loans grew by 6.2% mostly on account of high growth in loan disbursements for the purchase of houses and cars.

The Malaysian economy will be supported by firm domestic demand

The economy will continue to expand, albeit at a more moderate pace, in the fourth quarter of 2022. The expected slower pace of growth reflects the more challenging global environment as well as absence of base effects. Nevertheless, growth for the whole year of 2022 is expected to remain robust given the strong outturns in the first three quarters of the year.

Looking ahead, the Malaysian economy is expected to expand by 4.0 – 5.0% in 2023[1]. Bank Negara Malaysia Governor Tan Sri Nor Shamsiah explained, “The Malaysian economy will continue to be supported by firm domestic demand amid continued improvements in the labour market. Growth would also benefit from the realisation of large infrastructure projects as well as higher tourist arrivals. However, Malaysia’s growth remains susceptible to a weaker-than-expected global growth, higher risk aversion in global financial markets, further escalation of geopolitical conflicts and re-emergence of supply chain disruptions.”

Headline inflation to moderate for the remainder of 2022

Headline inflation is expected to moderate in the fourth quarter of 2022, but remain elevated. The base effect from the discount on electricity bill which contributed to higher inflation in the third quarter will dissipate in the fourth quarter of 2022[2]. Overall, headline inflation is expected to average at 3.3% in 2022.[3] Underlying inflation, as measured by core inflation, is expected to stay elevated for the remainder of 2022 given improving demand amid the high-cost environment.

Moving into 2023, headline and core inflation are expected to remain elevated amid both demand and cost pressures, as well as any changes to domestic policy measures. Additional upward pressures to inflation will remain partly contained by the existing price controls, subsidies, and the remaining spare capacity in the economy. The balance of risk to the inflation outlook in 2023 is tilted to the upside and continues to be subject to domestic policy measures on subsidies, as well as global commodity price developments arising mainly from the ongoing military conflict in Ukraine and prolonged supply-related disruptions.

See also:

[1] Source: Economic Outlook 2023, Ministry of Finance Malaysia.

[2] The discount on electricity bill was implemented in 3Q 2021 under the PEMULIH Electricity Discount scheme.

[3] Source: Economic Outlook 2023, Ministry of Finance Malaysia.

Bank Negara Malaysia
11 November 2022

— End of Press Release from BNM —

Property market should lag Economy Malaysia if you ask me

I will be alarmed if the property market is growing fast and yet the economy is in the doldrums. Frankly, speculation is always bad for the property market, for the stock market and for anything and everything which people term as investment. Investment means LONG TERM. If we invest today and we get immediate returns, that’s not investment yeah. Haha. That’s just gamble.

This is why everyone is saying the property market is slow currently and I think it makes sense. Let’s hope that these positive set of numbers will mean higher pay next year for many people. Well if the employer is doing well and they do not want to pay you higher, then change jobs lah. There are many employers who are willing to pay more to get talents. However… if we are unable to find another job which pays us more, is it the market issue or perhaps we could also look at the value of our role too. Remember, do more, get higher pay. Do the same and get higher pay means very soon one will be out of job. Happy understanding and following economy Malaysia news.

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