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Malaysia Economic Forecast

Malaysia Economic Outlook

In Q4, the economy expanded at a slower annual pace compared to Q3. Q4’s slowdown was broad-based, with private spending registering the steepest moderation due to a less favorable base and strong inflationary pressures. Meanwhile, exports growth deteriorated against a bleaker external background. Nevertheless, full-year growth for 2022 came in at 8.7%, the highest rate since 2000. In Q1 2023, annual economic growth is likely slowing further. In January, the manufacturing PMI declined further into contractionary terrain owing to falling output and weaker new orders. Moreover, tighter financial conditions in key export markets are likely depressing external demand. On 15 February, Fitch Ratings affirmed Malaysia’s BBB+ rating. The agency lauded the economy’s diversification supporting strong medium-term growth but pointed to elevated public debt and political uncertainty as key liabilities.

Malaysia Inflation

Inflation cooled to 3.8% in December (November: 4.0%), sustaining the downtrend in price pressures. Price controls, fuel subsidies, higher interest rates and waning domestic demand should see the headline rate fall to the Central Bank’s 2.0–3.0% target in Q2 2023. Higher wages, potential depreciatory pressures on the ringgit and commodity price spikes pose upside risks.

Malaysia Economic Data

2017 2018 2019 2020 2021
Population (million) 32.0 32.4 32.5 32.6 32.7
GDP (USD bn) 319 359 365 337 373
GDP per capita (USD) 9 11 11 10 11
GDP (MYR bn) 1 1 1 1 1
Economic Growth (Nominal GDP, ann. var. %) 9.8 5.5 4.5 -6.3 9.0
Economic Growth (GDP, ann. var. %) 5.8 4.8 4.4 -5.5 3.1
Domestic Demand (ann. var. %) 6.5 5.6 4.3 -5.5 1.7
Private Consumption (ann. var. %) 6.9 8.0 7.7 -4.2 1.9
Government Consumption (ann. var. %) 5.7 3.4 1.5 5.0 5.3
Fixed Investment (ann. var. %) 6.1 1.4 -2.1 -14.4 -0.9
Exports (G&S, ann. var. %) 8.7 1.9 -1.0 -8.6 15.4
Imports (G&S, ann. var. %) 10.2 1.5 -2.4 -7.9 17.7
Industrial Production (ann. var. %) 4.4 3.2 2.4 -4.1 7.4
Retail Sales (ann. var. %) 10.0 12.4 7.0 -2.0 3.5
Unemployment (% of active population, aop) 3.4 3.3 3.3 4.5 4.6
Fiscal Balance (% of GDP) -3.0 -3.7 -3.4 -6.2 -6.5
Public Debt (% of GDP) 50.0 51.2 52.4 62.0 63.4
Money (ann. var. of M2 %) 5.1 8.9 3.5 4.5 6.3
Inflation (CPI, ann. var. %, eop) 3.5 0.2 1.0 -1.4 3.2
Inflation (CPI, ann. var. %, aop) 3.8 1.0 0.7 -1.1 2.5
Inflation (PPI, ann. var. %, aop) 6.7 -1.1 -1.4 -2.7 9.5
Overnight Policy Rate (%, eop) 3.00 3.25 3.00 1.75 1.75
3-Month KLIBOR (%, eop) 3.44 3.69 3.35 1.94 2.05
10-Year Bond Yield (%, eop) 3.94 4.08 3.35 2.69 3.58
Stock Market (ann. var. of FTSE BM KLCI %) 0.2 11.8 -9.9 -9.1 2.3
Exchange Rate (MYR per USD, eop) 4.05 4.13 4.09 4.02 4.17
Exchange Rate (MYR per USD, aop) 4.30 4.04 4.14 4.20 4.14
Current Account Balance (USD bn) 8.9 8.0 12.8 14.1 14.2
Current Account Balance (% of GDP) 2.8 2.2 3.5 4.2 3.8
Merchandise Trade Balance (USD bn) 22.9 30.7 35.2 43.6 61.2
Merchandise Exports (USD bn) 217 249 240 234 299
Merchandise Imports (USD bn) 195 218 205 191 238
Merchandise Exports (ann. var. %) 14.5 14.4 -3.4 -2.5 27.9
Merchandise Imports (ann. var. %) 15.4 12.1 -6.0 -7.1 25.0
Foreign Direct Investment (USD bn) 9.4 7.6 7.8 3.2 11.6
International Reserves (USD bn) 102 101 104 108 117
International Reserves (months of imports) 6.3 5.6 6.1 6.8 5.9
External Debt (USD bn) 219 223 232 238 260
External Debt (% of GDP) 68.5 62.3 63.4 70.6 69.7

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