Malaysia Sees 14% Growth in Third Quarter, as Poll Looms

Malaysia’s economy grew at its fastest in over a year in the third quarter, better than its Southeast Asian peers.

That’s positive news for the government of Ismail Sabri Yaakob to trumpet in the lead-up to a national election on November 19.

Gross domestic product (GDP) rose 14.2% in the July-September period from a year earlier, the fastest since the second quarter of 2021 and the first double-digit growth in over a year.

But the country’s central bank was cautious, saying the outlook is clouded by the risk of a global slowdown.

Growth came in above the 11.7% growth forecast in a Reuters poll and the 8.9% annual rise in the previous quarter, the central bank said. It expected growth to outpace the government’s projection for a 6.5%-7% expansion this year.

The jump in the third quarter was driven by a continued expansion in domestic demand, a firm recovery in the labour market, solid exports, and ongoing policy support, central bank governor Nor Shamsiah Yunus told a news conference on Friday.

It surpassed third-quarter growth in many of its regional peers including Indonesia, the Philippines, Singapore and Vietnam.

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Growth Expected to Slow

Bank Negara Malaysia said that economic growth was likely to slow to 4%-5% next year, as major central banks have embarked on some of the most aggressive round of rate rises in decades to curb inflation, risking a downturn in the global economy.

“We acknowledge there are still some spots in our economy that have yet to return to pre-pandemic condition,” Nor Shamsiah said. “The moderation in global growth will particularly have an impact on Malaysia’s exports.”

Headline inflation likely peaked at 4.5% in the third quarter and is expected to moderate thereafter, but it will remain elevated, the central bank said.

Inflation in Malaysia has been largely contained by record government subsidies and price control measures this year, but upside risks remain, with the central bank delivering its fourth consecutive 25-basis-point rate hike last week.

Since May, BNM has raised rates by a total of 100 basis points from a historic low of 1.75%, in a bid to temper inflation.

The rate hikes come as the ringgit has fallen 10.8% against the US dollar this year, with the greenback supported by the Federal Reserve’s aggressive monetary tightening.

Nor Shamsiah said the ringgit currency will adjust to reflect Malaysia’s economic fundamentals once uncertainties caused by the US rate moves recede, without elaborating further.

“Malaysia is not in an economic crisis,” she said, adding that the country will not see a recession next year.