Malaysia’s 2022 GDP projection hiked after strong Q3 showing

Research firms on Monday raised their full-2022 economic expansion forecasts for Malaysia after it recorded stronger-than-expected growth in the third quarter.

In a note, Hong Leong Investment Bank Research said it had revised upward the Southeast Asian nation’s gross domestic product (GDP) projection for this year to 8.2 percent from 6.5 percent earlier.

“Although we still expect growth to moderate in [the fourth quarter], following the absence of base effect and weakening external demand, the [Malaysian] economy is expected to continue to be supported by domestic demand amid [an] improving labor market,” the research house said.

But the darkening global economic outlook led Hong Leong to lower its 2023 GDP forecast to 4.2 percent from the previous 4.5 percent, which still falls within the official forecast range of 4 percent to 5 percent.

Affin Hwang Investment Bank also hiked its 2022 growth outlook to 7.5 percent, saying it believed the “domestic economy will continue to be supported by healthy labor market conditions, as well as the steady recovery in tourism-related industries.”

For the entire year, the lender sees Malaysia’s economy to be driven by internally generated growth, especially from private consumption.

Based on its estimate, domestic demand is seen to grow 9 percent year on year in 2022, compared with 1.9 percent in 2021.

UOB Global Economics and Markets Research also upgraded its growth estimate for this year to 8.3 percent from 6.5 percent earlier after taking into account the 9.3-percent expansion in the first nine months and a projected 5.5-percent growth in the fourth quarter.

“Our new GDP growth forecast for the entire 2022 [would be] the strongest since 2000. It also suggests a possible upward revision in the government’s growth target of 6.5 percent to 7 percent for 2022,” it said.

According to the research house, favorable base effects; full reopening of economic and social activities, as well as Malaysia’s borders; continued government subsidies; and higher national monthly minimum wages would bolster Malaysia’s growth this year amid strong global demand.

But it said their impact was expected to wane in 2023, as more challenging external factors, geopolitical conflicts, elevated global inflation pressures, tighter central bank policy and global liquidity, rising financial volatility and global tech downcycle would further weigh on both global and domestic growth momentum next year.

“As such, we maintain our growth outlook for next year with a moderate real GDP expansion of 4 percent, compared to the official estimate of 4 percent to 5 percent,” it added.

MIDF Research raised its fullyear growth projection to 8 percent from 6.6 percent previously, saying that “even with 0-percent quarter-on-quarter growth in the next quarter, the 2022 GDP growth would be at least 7.7 percent.”

Continued improvement in income and positive labor market conditions will continue to support consumption in the final quarter of 2022 and going into 2023, it added.