Malaysia Exports (G&S, ann. var. %)

GDP records slowest increase since Q1 2022 in the fourth quarter

GDP growth moderated to 7.0% year on year in the fourth quarter, from 14.2% in the third quarter. Q4’s reading was the worst since Q1 2022.

The downturn was broad-based: Growth in private consumption, public spending, fixed investment and exports all weakened. Private consumption—which accounted for nearly 60% of GDP in Q3—increased 7.4% in the fourth quarter (Q3: +15.1%). This was partly due to a strong base effect due to the loosening of Covid-19 restrictions. Government spending growth also eased, expanding 2.4% (Q3: +4.5%). Fixed investment growth moderated to 8.8% in Q4, down from 13.1% in the previous quarter.

Additionally, exports of goods and services increased 9.6% year on year in the fourth quarter (Q3: +23.9%) on a bleaker global economy. Moreover, growth in imports of goods and services waned to 8.1% in Q4 (Q3: +24.4%), pointing to cooling domestic demand.

Underlying momentum also weakened: On a seasonally adjusted quarter-on-quarter basis, GDP contracted 2.6% in Q4, compared with the previous period’s 1.9% growth. Q4’s reading marked the largest drop in GDP since Q3 2021.

Commenting on the outlook, Euben Paracuelles and Rangga Cipta, economists at Nomura, said:

“We maintain our 2023 GDP growth forecast, which we recently raised to 4.2% from 3.7%, mainly reflecting upward revisions to our global growth forecasts led by the US and China. At the same time, we expect elevated global uncertainty and local political dynamics to continue weighing on business sentiment, leading to lower investment spending.”