Malaysia's economy may have expanded in Q4, but remains cloudy

KUALA LUMPUR: Malaysia's economy may have expanded 3.4 percent from a year earlier in the fourth quarter of 2023, slightly faster than in the previous three-month period, although a decline in exports and easing activity signaled a weaker pace.

While all major sectors recorded expansion in the October-December period, growth in construction slowed to 2.5 percent from 7.2 percent in the previous quarter, and manufacturing growth was almost stagnant at 0.1 percent, official advance estimates released by the Statistics Department on Friday showed.

Gross domestic product (GDP) expanded 3.3 percent in the third quarter of 2023 as moderate domestic spending offset weak external demand. Malaysia's exports contracted 8 percent in 2023 after falling since March, according to trade data released separately on Friday.

The department started publishing preliminary estimates of quarterly economic performance in October last year, and the demand for timely statistics and compliance with international best practices.

Malaysia's full-year economic growth is expected to be 3.8 percent in 2023, below the government's forecast of a 4 percent expansion and the sharpest decline in 22 years to 8.7 percent in 2022.

Malaysia's growth outlook is expected to remain cloudy in the coming months, analysts said, flagging risks including rising inflation following planned subsidy cuts this year.

„We think the economy will remain weak due to high interest rates, a cooling labor market, soft foreign demand and low commodity prices,” Sivan Tandon, emerging Asia economist at Capital Economics, said in a note.

Oxford Economics' Alex Holmes said the government's forecast of 4 percent-5 percent growth in 2024 was „difficult to achieve” amid subdued domestic consumption and subdued global growth.

The data release comes ahead of Bank Negara Malaysia's monetary policy meeting on Jan 24. The central bank is likely to keep its benchmark interest rate unchanged for a fourth straight time, according to a Reuters poll of 28 economists.

The final fourth quarter and 2023 GDP figures are expected to be released on February 16.