Latest Q1 GDP figures in Malaysia surprised to the upside, note Senior Economist Julia Goh and Economist Loke Siew Ting at UOB Group.

Key Takeaways

“Malaysia’s economy chalked up a robust growth of 5.6% y/y in 1Q23, which was better than our estimate (5.0%) and Bloomberg consensus (5.1%). Nevertheless, growth momentum moderated further compared to 4Q22’s 7.1% y/y. On a seasonally adjusted basis, real GDP expanded 0.9% q/q (4Q22: -1.7% q/q).”

“Growth was anchored by domestic demand particularly private consumption and investments, while net exports added 2.1ppts to headline growth in 1Q23. All sectors expanded last quarter, led by services, manufacturing, and construction industries. The current account surplus narrowed to MYR4.3bn (or 1.0% of GDP) in 1Q23, from MYR27.5bn (5.9% of GDP) in 4Q22.”

“The better-than-expected 1Q23 GDP outturn has lifted our full year GDP outlook even though we are keeping an average GDP expansion of ~4.0% for the rest of the year. We remain cautious on the external outlook while domestic drivers are seeing signs of normalisation and moderation. Hence, we raise our full year GDP growth forecast to 4.4% for 2023 (from 4.0% previously, 2022: 8.7%). Brighter avenues in 2H23 include stronger investment recovery, higher tourism activity, lower unemployment rate, and supportive policy measures particularly gradual removal of price controls and subsidies that help to contain inflation pressures.”