Malaysia posts stronger-than-expected Q4 GDP; global slowdown clouds outlook

KUALA LUMPUR: Malaysia’s economy in the fourth quarter grew 7% from a year earlier on continued expansion in domestic demand and resilient demand in electrical and electronics goods, Bank Negara Malaysia (BNM) Governor Nor Shamsiah Mohd Yunus said on Friday.

Economists polled by Reuters had expected the central bank to report that gross domestic product in October-December had been 6.6% higher than in the same period of 2021, slowing from a 14.2% annual growth seen in the third quarter.

GDP for all of 2022 was 8.7% higher than in 2021, the fastest full-year growth in 22 years and surpassing the government’s forecast for 6.5% to 7%.

The central bank has said it expects growth in full-year GDP to moderate to between 4% and 5% in 2023, amid a global slowdown.

On Friday it flagged risks such as further escalation of geopolitical tensions, re-emergence of significant supply chain disruptions and higher interest rates globally.

It added that did not discount the possibility of growth in 2023 being higher than expected, despite downside risks.

“Malaysia will not go into a recession,” Nor Shamsiah told reporters, adding that income was growing and investment numbers remained strong. BNM expects the reopening of China’s international borders to drive a recovery in tourist arrivals and to cushion the impact of a slowdown in export growth.

“We remain optimistic for growth in Q1; it may also show stronger growth momentum compared to Q4,” she said.

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The bank expected that over the course of 2023 headline and core inflation would moderate but remain elevated, she said. Headline and core inflation averaged 3.3% and 3.0% respectively in 2022.

Last month, BNM unexpectedly kept its benchmark interest rate unchanged, flagging risks to economic growth after four consecutive rate hikes last year.

Nor Shamsiah said the decision to maintain the level of the overnight policy rate (OPR) allowed the bank to assess the impact of its OPR adjustments on inflation and the economy.

“This would give us better clarity on inflation and economic output,” she said.