PETALING JAYA: BMI, a Fitch Solutions company, has revised its forecast for Malaysia’s real gross domestic product (GDP) growth this year to 4.2% from 4.0% previously, attributed to the better-than-expected 5.6% year on year (y-o-y) expansion in the first quarter.
Based on its recent outlook report on Malaysia, BMI said its forecast still implies that growth will slow over the coming quarters, which it anticipates will be driven by a slowdown in global demand and tighter credit conditions.
It said the official data released on May 12 showed Malaysia’s real GDP expanding by 5.6% in Q1’23, which it remarked was well above consensus and its expectations of 4.8%.
“However, the picture is by no means upbeat. The latest figures still correspond to a sharp slowdown, from 7.1% y-o-y in Q4’22.
“On a seasonally adjusted basis, the 0.9% quarter-on-quarter rebound is nowhere large enough to reverse the contraction of 1.7% in Q4’22,” BMI said in a statement.
In addition, the research house said it expects private consumption to grow by 5.0% in 2023, easing significantly from 11.3% in 2022 due to a decline in household savings and tighter monetary conditions.
“The boost received in (the second half of 2022) H2’22 stemming from base effects and pent-up demand following the easing of Covid-19 restrictions have eased and households have since drawn down their savings significantly since April 2022,” it added.
The research arm cited the recent announcement by Prime Minister Datuk Seri Anwar Ibrahim that Employee Provident Fund withdrawals – which were allowed during the Covid pandemic – are no longer permitted.
“Along with Bank Negara Malaysia’s cumulative 125 basis point hike since 2022, we expect private consumption to slow further in the coming quarters,” it said.
On expenditure contribution in Malaysia, BMI said the growth slowdown in Q1’23 was broad-based, with exports the biggest drag on the economy, which plunged from growth of 8.6% y-o-y in Q4’22 to a 3.3% contraction in Q1’23.
“Government consumption swung from growth of 3.0% y-o-y to a 2.2% contraction. Meanwhile, private consumption slowed from 7.3% y-o-y to 5.9%, while gross fixed capital formation decelerated from 8.8% to 4.9%,” it noted.
BMI opined that the impact of high borrowing costs will also be felt by businesses, which underpins its forecast for investment growth to slow to 2.3% of GDP in 2023, from 7.5% in 2022.
It cited Malaysia’s manufacturing purchasing managers’ index, which came in at 48.8 in April, marking the eighth consecutive month in which the reading has stayed below the 50.0 mark that separates contraction from expansion.
Adding to that, “business tendency survey has remained below 2022 levels and suggests that sentiment remains weak”.
Meanwhile, BMI expects export growth to slow to 1.0% in 2023 from 12.8% in 2022 amid a slowdown in the global economy.
