Malaysia Economy Grows Most In A Year

(RTTNews) - Malaysia's economy grew at the fastest pace in a year in the second quarter as household spending strengthened on the labor market recovery, official data showed on Friday.

The economic growth accelerated to 8.9 percent in the second quarter from 5.0 percent in the first quarter, the Bank Negara Malaysia reported. The rate was the fastest since the second quarter of 2021 and also exceeded economists' forecast of 6.7 percent.

Private consumption expenditure grew the most by 18.3 percent, following a 5.5 percent rise a quarter ago, underpinned by higher consumption in the transport, food and non-alcoholic beverages and restaurants and hotels.

Driven by positive growth in all types of assets, gross fixed capital formation advanced 5.8 percent, faster than the 0.2 percent gain a quarter ago. Meanwhile, growth in government spending moderated to 2.6 percent from 6.7 percent.

Growth in exports improved to 10.4 percent from 8.0 percent. Similarly, imports climbed 14.0 percent after rising 11.1 percent. Quarter-on-quarter, gross domestic product advanced 3.5 percent versus 3.8 percent in the first quarter.

In the first half of the year, the economy grew 6.9 percent but slightly weaker than the 7.0 percent increase in the first half of 2021.

The Malaysian economy is projected to expand further for the remainder of the year. BNM Governor Tan Sri Nor Shamsiah said, "While external demand could face headwinds from slower global growth, the Malaysian economy will continue to be supported by firm domestic demand."

Growth would also benefit from improving labour market conditions and higher tourist arrivals, as well as continued implementation of multi-year investment projects, the banker said. Nonetheless, the governor cautioned that growth remains susceptible to a weaker-than-expected global growth, further escalation of geopolitical conflicts and worsening supply chain disruptions.

Growth will slow further from here, Gareth Leather, an economist at Capital Economics said. That said, the slowdown is likely to be relatively mild, with the reopening of the international border set to provide decent support to activity.

The economist expects economic growth to slow from 8.5 percent this year to 5.5 percent in 2023.

In the second quarter, headline inflation rose to 2.8 percent from 2.2 percent in the first quarter and core inflation climbed to 2.5 percent from 1.7 percent.

The central bank forecast headline inflation to trend higher in some months during the remainder of the year, due partly to the base effect from the discount on electricity prices implemented in the third quarter of 2021.

Core inflation is also expected to average higher in 2022, as demand continues to improve amid the high-cost environment.

In a separate communiqué, the bank showed that the current account surplus increased to EUR 4.4 billion from EUR 3.0 billion in the previous quarter, primarily driven by net exports of goods account.