Malaysia: GDP figures remain healthy in Q3 – UOB

Malaysia’s final GDP growth edged up to 3.3% y/y in 3Q23 (from +2.9% in 2Q23), matching the advance estimate reading released on 20 Oct. On a seasonally adjusted basis, real GDP posted the largest expansion in five quarters by 2.6% q/q (2Q23: +1.5%), suggesting a sustained recovery amid rising challenges and an accommodative monetary policy stance during the quarter.

3Q23’s real GDP growth was mainly anchored by resilient domestic demand and stock replenishment activities. An improvement in the services, agriculture and construction sectors helped to cushion the sluggishness in the manufacturing and mining & quarrying sectors last quarter. Although the external sector remained weak, but the country was still able to record a sustained current account surplus of MYR9.1bn or 2.0% of GDP in 3Q23 (2Q23: +MYR9.1bn or 2.1%). 

Cumulatively, real GDP growth stood at 3.9% in the first nine months of 2023 (Jan-Sep 2022: +9.2%). The larger seasonally adjusted GDP growth implies the persistence of a gradual recovery in the economy in 4Q23, which we estimate at ~4.0% y/y. It will take the full-year growth rate to ~4.0% for 2023, in line with our existing projection and the Ministry of Finance (MOF)’s revised growth target of ~4.0%. We expect the growth momentum to improve further to 4.6% in 2024 (MOF est: 4.0%-5.0% or mid-point forecast of 4.8%), backed by a base case scenario of a soft landing in the global economy despite rising global uncertainties. This respectable growth outlook along with broad market expectations of a Fed easing starting from the middle of 2024 continue to support our call for the Overnight Policy Rate (OPR) to stay unchanged at 3.00% through 2024.