Malaysia’s economy expanded 3.3% in the third quarter of 2023 from a year earlier as resilient domestic demand offset continued export weakness.
The gross domestic product (GDP) growth beat the 3% median average forecast of a Reuters survey of economists and was better than the 2.9% growth recorded in the previous quarter.
On a quarter-on-quarter seasonally adjusted basis, the economy grew 2.6%.
Over the first three quarters of 2023, Malaysia’s economy grew 3.9%.
During the recent quarter, household spending remained supported by continued growth in employment and wages while investment activity was underpinned by the progress of multi-year projects and capacity expansion by firms, said Bank Negara.
Exports remained soft on weak external demand, although this was partially offset by a recovery in inbound tourism.
On the supply side, the services, construction and agriculture sectors remained supportive of growth.
This was partly offset by the decline in production in the manufacturing sector given the weakness in demand for electrical and electronic (E&E) products and lower production of refined petroleum products.
In his outlook for the Malaysian economy, Bank Negara governor Datuk Abdul Rasheed Ghaffour said it was expected to expand by about 4% in 2023 and 4-5% in 2024.
“Growth will continue to be driven by the expansion in domestic demand amid steady employment and income prospects, particularly in domestic-oriented sectors.
“This growth performance along with other favourable economic developments would provide support to the ringgit,” he said in a statement.
He said improvements in tourist arrivals and spending are expected to continue.
Meanwhile, investment will be supported by further progress of multi-year infrastructure projects and the implementation of catalytic initiatives.
Measures under Budget 2024 will also provide additional impetus to economic activity, he added.
Abdul Rasheed said downside risks could dampen the growth outlook, primarily stemming from weaker-than-expected external demand as well as larger and more protracted declines in commodity production.
Upside risk factors, however, include stronger-than-expected tourism activity, a stronger recovery from the E&E downcycle, and faster implementation of existing and new investment projects, he said.
On rising costs, Bank Negara said both headline and core inflation have been declining throughout the year, mainly due to milder cost conditions, which will likely continue for the remainder of 2023.
The central bank reported that headline inflation is expected to average between 2.5% and 3% in 2023.
“Going forward, risks to the inflation outlook remain highly subject to changes to domestic policy on subsidies and price controls, as well as global commodity prices and financial market developments,” it said.