Malaysia Posts Highest Growth in Decades as Global Outlook Dims

Malaysia grew at the quickest pace in more than two decades in 2022, as pent-up demand helped the nation take the mantle of the fastest-growing economy in Asia even if the title is likely to be shortlived.

Gross domestic product rose 8.7% last year, the highest level since 2000, data from Bank Negara Malaysia and the Department of Statistics showed. That compares with the median estimate of 8.6% year-on-year growth in a Bloomberg survey, and aligns with official expectations.

In the October-December period, the economy notched up a better-than-expected 7% expansion from a year ago, helped by domestic demand. On a sequential basis, however, data showed the economy contracted 2.6% from the quarter ended September — a performance that authorities attributed to waning support from stimulus measures.

That points to risks capable of dislodging Malaysia from the top spot among 13 Asian economies tracked by Bloomberg, with economists seeing the pace of expansion slowing to 4% this year. While cash handouts and subsidies on food and fuel helped maintain demand in 2022 despite 100 basis-points of interest-rate hikes, a slowing global economy can hurt exports and dim the outlook.

“Balance of risks of growth remain tilted to the downside due to external factors,” central bank governor Nor Shamsiah Yunus said in a briefing in Kuala Lumpur on Friday. Still, the risks aren’t great enough to push the economy into a recession, she added.

December’s export growth of nearly 6% was below expectations and substantially slower after 16 consecutive months of double-digit expansion. While headline and core inflation are seen to moderate this year, the government expects them to remain at elevated levels.

There are bright spots on the horizon. Domestic demand will continue to drive the economy in 2023. China’s expected economic recovery in the second half of the year may provide further support, given its role as Malaysia’s largest trading partner for 14 straight years, economists at RHB Bank said before the data. The slowdown in exports following weaker global demand may be partially cushioned by higher tourism activity, BNM said.

“While we expect manufacturing activity to soften further this year, the services-sector recovery, driven by the revival in international travel, should provide a significant offset, especially as China has reopened its borders,” said Brian Tan, senior economist at Barclays Plc in Singapore. 

The ringgit weakened 0.3% to 4.3300 per dollar at 12:30 p.m. local time, while the main equities index held gains, rising 0.5% at the midday break.

Malaysia’s policymakers, who raised borrowing costs in four straight quarter-point moves last year to fight inflation, are turning their focus to shielding the economy from a gloomy global outlook. BNM unexpectedly kept borrowing costs unchanged during its meeting last month, as it sought to assess the impact of past adjustments.

At current level, “monetary policy remains accommodative and supportive of economy,” the governor said. The authority “will continue to caliberate monetary policy based on ensuring sustainable domestic growth in an environment of price stability,” she said.

Prime Minister Anwar Ibrahim is set to unveil a fresh spending plan for 2023 in two weeks, which may include new economic estimates and a focus on rising sovereign debt levels.

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