MALAYSIA’S economy expanded by 2.9% in the second quarter of 2023 (2Q 2023), supported by an improving labour market and continued increase in domestic demand and tourism.

Chief statistician Mohd Uzir Mahidin said Malaysia’s economic growth moderated during the quarter, partly due to weaker external demand amidst the global technology cycle, lower commodity production and high base effect from the second quarter of last year, which saw GDP growth of 8.9%.

Malaysia posted a GDP growth of 5.6% in the first quarter, taking the average growth for the first half of the year to 4.25%.

On a quarter-on-quarter seasonally-adjusted basis, the economy grew by 1.5%, compared to 0.9% in Q1.

Bank Negara Malaysia (BNM) governor Abdul Rasheed Ghaffour said Malaysia is on track to achieve a growth of 4-5% this year, backed by the labour market’s continued recovery, implementation of projects and rising tourism activity.

He added that the Madani economy framework would drive the comprehensive restructuring of the economy.

Inflation

Today, at a press conference in Kuala Lumpur,, Rasheed said theheadline inflation is expected to range from 2.8-3.8% in 2023, due to moderation in core inflation and gradual subsidy rationalisation.

“Core inflation, while declining, remained elevated relative to its long-term average,” he said.

The average for 2011-2019 was 2%.

He noted that both non-core inflation and core inflation had moderated, where fresh food and fuel contributed to the decline in non-core inflation, while the moderation in core inflation to 3.4% from 3.9% in the first quarter was largely contributed by selected services.

“Inflation pervasiveness declined as the share of Consumer Price Index (CPI) items recording monthly price increases moderated to 42.7% during the quarter (compared to 56% in Q1), below the second quarter long-term average of 43.9%.

“Notably, inflation pervasiveness dropped in June after a transitory uptick in May following the festive season,” Rasheed said.

Headline and core inflation in the second half is projected to trend lower, partly due to the higher base in the same period last year.

He noted that risks to the inflation outlook are subject to the changes to domestic policy on subsidies and price controls, as well as global commodity prices and financial market developments.

Outlook

Moving forward, he said economic growth would continue to be supported by domestic demand amid improving employment and income as well as the implementation of multi-year projects.

Tourist arrivals are expected to continue rising.

“Risks to Malaysia’s growth outlook are subject to downside risk stemming primarily from weaker-than-expected global growth.

“There are, however, upside risk factors such as stronger-than-expected tourism activity and faster implementation of projects.” – Bernama, August 18, 2023.