Malaysia’s economy grows 4.2% in 1Q, beating expectations

KUALA LUMPUR: Malaysia’s gross domestic product (GDP) grew at a rate of 4.2% in the first quarter of 2024, an increase from 3% growth in the preceding quarter as the economy was bolstered by strong private expenditure and a positive turnaround in exports.

The growth was higher than the 3.9% year-on-year increase put forward in an advance estimate by the National Statistics Department as well as in a Bloomberg survey of economists.

On a quarter-on-quarter seasonally-adjusted basis, the economy expanded 1.4%

In its outlook, Bank Negara said growth in 2024 will be driven by resilient domestic expenditure with additional support from the recovery in external demand.

It said continued employment and wage growth will support household spending while improvement in tourist arrivals and spending are expected to continue.

“Investment activities will be driven by progress in multi-year projects across private and public sectors, alongside catalytic initiatives announced in national master plans, as well as the higher realisation of approved investments,” it added.

However, the central bank said the growth outlook remains subject to downside risks stemming from weaker-than-expected external demand, further escalation in geopolitical conflicts and larger declines in commodity production domestically.

Upside risks, on the flip side, include greater spillover from the tech upcycle, more robust tourism activities and faster implementation of existing and new investment projects.

During the first quarter, headline inflation remained moderate at 1.7%, which was a modest increase reflecting the policy adjustments to water tariffs in February and services tax for high-usage electricity in March.

Core inflation moderated to 1.8%, largely driven by continued easing in the food and beverages segment.

On the local currency, Bank Negara said the ringgit has depreciated 2.4% since the start of the year, in line with the movements of other regional currencies.

“Bank Negara is deploying the tools at its disposal to ensure that domestic financial markets remain orderly and continue to function efficiently.

“In addition, the coordinated initiatives by the government and Bank Negara with the government-linked companies (GLCs) and government-linked investment companies (GLICs), as well as engagements with corporates and exporters have gained further traction, resulting in greater and more consistent flows into the foreign exchange market.”

The central bank also reported credit growth in the private non-financial sector to 5.2% with higher growth in outstanding loans to both businesses and households.

Outstanding corporate bonds growth moderated to 3.2%.

“The higher business loan growth was driven mainly by higher growth in investment-related loans. By sector, the stronger growth was supported by the construction and services sectors.

“For households, outstanding loan growth was higher across most loan purposes, reflecting continued demand for loans, particularly for the purchase of housing and cars,” it said.