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Malaysia GDP Q4 2023

Malaysia: Economy loses steam in the fourth quarter

The fourth quarter’s GDP growth was revised down to 3.0% year on year, from the first estimate of 3.4% (Q3: +3.3% yoy). On a seasonally adjusted quarter-on-quarter basis, economic activity dropped 2.1% in Q4, contrasting the previous period’s 2.6% growth. Q4’s reading marked the sharpest drop since Q3 2021. Overall, Malaysia’s economy grew 3.7% in 2023, moderating from 2022’s 8.7% rise and falling below the government’s 4.0% target.

GDP lost steam in Q4 year on year, largely due to cooling growth in private spending: Household consumption grew 4.2% year on year in Q4, compared to Q3’s 4.6% expansion. More positively, public spending and investment prevented a larger loss in domestic momentum: Public spending registered a 7.3% expansion in Q4 (Q3: +5.8% yoy), while fixed investment growth picked up to 6.4% in Q4, from the 5.1% increase logged in the prior quarter.

On the external front, exports of goods and services contracted at a softer pace of 6.3% year on year in the final quarter, which marked the best reading since Q1 (Q3: -12.0% yoy). Imports of goods and services declined at a milder pace of 2.9% in Q4 (Q3: -11.1% yoy).

Malaysia’s economy is set to accelerate in 2024, supported by stronger fixed investment growth and rebounding exports amid a recovering global electronics sector. Broadly stable public and private spending expansions should also support momentum. That said, still-tight monetary conditions, sticky inflation and an uncertain external backdrop will weigh on growth. Weaker-than-expected demand from key trading partners—most notably China—poses a downside risk, while a weaker-than-anticipated El Niño weather event poses an upside risk.

Nomura analysts commented on the outlook:

“Despite the downward revision in Q4, we continue to expect a brightening growth outlook this year […]. Our forecast reflects our view of more robust external demand conditions with the US economy avoiding a recession, based on our US team’s latest forecasts. Export growth should, as a result, hold up better in H2 after gathering some momentum in H1, led by a recovery in the electronics sector in line with our view of the global tech turnaround. We also expect domestic demand, particularly private consumption, to follow a broadly similar trajectory, owing to the large and quick spillover effects from an improving export growth to the labor market and wage growth.”

United Overseas Bank analysts Julia Goh and Loke Siew Ting commented on the outlook:

“The slower-than-expected GDP growth outturn in 2023 will provide a favourable base effect for 2024’s economic outlook, in addition to several positive growth catalysts including global tech upcycle, tourism recovery, initiatives outlined in the national master plans and realization of impressive investment approvals since 2021. […] Although the 1H24 growth path could still be bumpy, 2H24 is expected to see a meaningful pick-up as global monetary conditions start to ease and the global economy holds up a soft landing.”

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