Consumption in Malaysia

Malaysia - Consumption

Economic growth records quickest expansion since Q2 2021 in Q1

GDP growth gained steam, coming in at 5.0% year on year in the first quarter, up from 3.6% in the fourth quarter of last year. Q1's reading marked the strongest expansion since Q2 2021 and exceeded market analysts’ expectations.

Private consumption improved to 5.5% year on year in the first quarter, also logging the best reading since Q2 2021 (Q4 2021: +3.7% yoy). Moreover, public consumption improved to 6.7% in Q1 (Q4 2021: +1.6% yoy). Meanwhile, fixed investment bounced back, growing 0.1% in Q1 and contrasting the 3.0% decline in the previous quarter.

On the external front, exports of goods and services growth waned to 8.0% in Q1 (Q4 2021: +13.0% yoy). In addition, imports of goods and services growth slowed to 11.1% in Q1 (Q4 2021: +14.5% yoy).

On a seasonally-adjusted quarter-on-quarter basis, economic growth waned notably to 3.9% in Q1, following the previous period's 4.6% expansion.

Due to Q1’s upside surprise, analysts at Goldman Sachs revised their forecasts upwards for 2022, and commented that:

“Incorporating actual Q1 data would mechanically push our annual real GDP growth forecast up to 7.7% in 2022, from 6.7% previously. However, as the reopening impulse was bigger and faster-than-expected in Q1 despite the Omicron wave and assuming some pay-back from inventories after the spike in Q1, we shave our forecasts for Q2 and Q3 modestly. We revise Q2 and Q3 sequential growth down to 0.6% s.a. qoq. and 1.1% s.a. qoq, respectively, from 1.1% qoq s.a. and 1.5% qoq s.a., previously. The overall effect of these changes is to push our annual 2022 GDP growth forecast up to 7.0% (from 6.7%, previously).”

On a similar note, analysts at the EIU see economic growth gaining steam in 2022 as a whole:

“The pace of economic activity is forecast to accelerate in 2022, aided by the gradual implementation of spending plans outlined in 12MP and the lifting of all Covid-19-induced restrictions […]. In 2022–2026, private consumption will retain its role as the primary driver of Malaysia's economic growth by expenditure. Households' purchasing power will remain relatively strong, supported by low consumption taxes, but the high level of household debt poses a downside risk to this forecast.

FocusEconomics panelists expect GDP to expand 5.9% in 2022, which is unchanged from last month’s forecast. In 2023, our panel sees GDP growth at 5.1%.