Malaysia’s economy beats forecasts with 5.6 percent growth

Solid performance comes as slowing global demand is expected to weigh on the export-oriented Southeast Asian economy.

Malaysia’s economy rebounded in the first quarter, supported by robust domestic demand, central bank and government data showed on Friday.

Gross domestic product rose 5.6 percent, according to Bank Negara Malaysia (BNM) and the Statistics Department, faster than the 4.8 percent annual growth analysts predicted in a Reuters poll. In the fourth quarter of 2022, the economy had grown by 7.1 percent, revised upwards from the previously announced 7.0 percent.

Growth reached a 22-year high of 8.7 percent last year as Malaysia recovered from a pandemic slump, but declining global demand is expected to weigh on the outlook for the export-oriented Southeast Asian economy.

However, the central bank said robust domestic demand will continue to drive economic expansion and maintains its 2023 growth forecast of between 4 and 5 percent.

Malaysia’s quarterly expansion has been supported by improved labor market conditions, continued major infrastructure projects and a recovery in tourism, BNM Governor Nor Shamsiah Mohd Yunus told a news conference.

“The economy is no longer in crisis and, in fact, continues to gain momentum,” she said.

“The risks to the growth outlook are fairly balanced, with downside risks mainly stemming from external factors.”

Neither Shamsiah signaled continued risks to inflation, not counting on further normalization of the benchmark interest rate following the central bank’s surprise 25 basis point hike last week, citing changing global developments.

Some economists saw the rate hike – which marked the return of borrowing costs to pre-pandemic levels – as the end of the central bank’s tightening cycle.

“All normalizations will depend on whether there are developments that will materially affect our assessment of inflation and growth prospects,” said Nor Shamsiah, when asked to comment on whether BNM was done with rate hikes.

BNM has said it expects core and headline inflation to moderate over the course of 2023, but to remain elevated.

It expects headline inflation to average between 2.8 percent and 3.8 percent this year, compared to 3.3 percent in 2022.