Malaysia’s economy accelerates to grow 3.3% in third quarter
In the third quarter, gross domestic product jumped 5.2 per cent quarter-on-quarter, rebounding from a 0.8 per cent decline in the second quarter
Malaysia’s economy accelerated in the third quarter, expanding 3.3 per cent from a year earlier, the statistics department said in a preliminary estimate on Friday, on the back of growth in services and other sectors.
Activity picked up ater 2.9 per cent growth in the second quarter, its slowest quarterly expansion in nearly two years, following sliding exports and a global slowdown.
In the third quarter, gross domestic product jumped 5.2 per cent quarter-on-quarter, rebounding from a 0.8 per cent decline in the second quarter.
The strong performance in July-september was due to growth in the services, construction and agriculture sectors, the statistics department said.
However, it said the mining and quarrying, and manufacturing sectors contracted in Julyseptember.
“Overall, the sum of the first three quarters of 2023 concludes that Malaysia’s economy grew by 3.9 per cent,” the department said.
The Malaysian government last week forecast 2023 full year growth of about 4 per cent, cuting its previous estimate of 4 per cent to 5 per cent.
Gareth Leather, senior Asia economist at Capital Economics, said while the growth estimate showed an unexpected rebound in the third quarter, the economy was unlikely to sustain the momentum.
“We expect growth to slow again over the coming months, with high interest rates, tighter fiscal policy and weak global growth set to drag on the economy,” Leather said in a research note.
It was the first time that Malaysia has released advance estimates for quarterly gross domestic product.
The statistics department said the new initiative has been “developed to meet the demand for timely macroeconomic statistics and are in line with best practices in developed countries.”
The final gross domestic product figure for the third quarter will be released on Nov. 17.
Meanwhile Malaysia said last week it would introduce a capital gains tax and a tax on highvalue goods and gradually cut subsidies to bolster its fiscal position, as an economic slowdown puts a strain on government spending.
Prime Minister Anwar Ibrahim is under pressure to revive Malaysia’s export-driven economy amid moderating growth, a weakening local currency and a rising cost of living.
As part of a smaller spending plan for 2024, Anwar, who is also finance minister, announced a shit away from blanket subsidies to a system that mainly aids lower-income groups.
“Although subsidised goods help the people minimise the cost of living, the fact remains that subsidies benefit the rich more, and low prices have increased wastages and smuggling out of the country,” Anwar said in his budget speech to parliament.
Malaysia subsidises petrol, cooking oil and rice among other items and has seen that expense climb to record levels in recent years due to higher commodity prices.
Anwar said diesel subsidies will be cut in a phased manner, while temporary price controls on chicken and eggs will be lited as supplies had stabilised.
Savings from subsidy cuts would be channelled to cash aid for the needy, which will now increase to 10 billion ringgit ($2.12 billion) from 8 billion ringgit, he added.
Inflation is expected to tick up due to the removal of some subsidies. Malaysia expects inflation at 2.1 per cent to 3.6 per cent for next year, compared with this year’s estimate of 2.5 per to 3 per cent.
Anwar also announced new and higher taxes to increase government revenue.
A capital gains tax would be introduced for the sale of unlisted shares at a rate of 10 per cent from March 1 next year. A tax of 5% to 10% would also be introduced for luxury goods, he said, without specifying the value of goods that would be subject to the tax.
The current tax on services would be increased to 8 per cent from 6 per cent, although the tax increase would not apply to some services such as food and beverage and telecommunications.
Malaysia will introduce a minimum tax in 2025 for companies with a global income of at least 750 million euros ($789.00 million) per year, in line with international standards, Anwar said.
The efforts are expected to help Malaysia narrow its fiscal deficit to 4.3 per cent of gross domestic product (GDP) in 2024 and 3 per cent in the medium term, from an estimated 5 per cent this year.
The economy, meanwhile, is expected to grow at about 4 per cent this year - a slower pace than previously expected, and 4% to 5% in 2024, driven largely by domestic demand.
Anwar, in his speech to parliament, said his government was confident that 2024 economic growth would reach close to 5%.
External factors such as deepening geopolitical tensions and tightening of monetary policies are increasing the risk of a global slowdown and affecting Malaysia’s prospects, the government said.