GDP Growth Accelerates to 5.9% in Q2!

Malaysia's economy in the April-June quarter grew 5.9% from a year earlier. This was also above 4.2% expansion during the previous three months, according to central bank. The latest gross domestic product figure represents the strongest growth since the fourth quarter of 2022.

Bank Negara Malaysia said that private consumption remained robust in the second quarter, supported by strong private and public sector investments.

Exports expanded 8.4% in the April-June period after growing 5.2% the previous quarter as Malaysia continued to benefit from global companies' supply chain shifting. Private consumption increased 6.0%, up from 4.7% the previous quarter. 

By industry, the manufacturing sector grew at a 4.7% pace up from 1.9% the previous quarter. The services sector expanded 5.9%, up from 4.8% the previous quarter. Growth on the farm came in at 7.2%, up from 1.7% the previous quarter, driven by the oil palm industry. On the other hand, mining and quarrying slowed to 2.7% from 5.7%, due to weaker natural gas production.

The central bank has projected that tourism receipts will reach 22.4 billion ringgit ($5 billion) this year, up from 21.4 billion ringgit in 2023. Tourist arrivals are expected to be higher than pre-pandemic levels at about 27.3 million, driven by increased flight capacities and higher numbers of Indians and Chinese, who are now given visa exemptions.

Core inflation increased to 1.9%, driven mainly by higher housing and utilities inflation of 3.1%.

The ringgit strengthened against the greenback in the first half of the year, hitting a 16-month high and showing positive prospects for economic growth. The central bank reported that the Malaysian currency appreciated by 3.8% against the U.S. dollar year-to-date. 

Elsewhere in Southeast Asia, Vietnam reported 6.93% second quarter growth, while the Philippines' GDP expanded by 6.3%.

CIMB Treasury and Market Research expects growth momentum to remain robust and above 5% in the second half of 2024, raising its full-year GDP growth forecast from 4.9% to 5.2%, above the official target range of 4-5%. Key growth drivers are export and tourism recovery, strong approved investments and construction awards providing visibility to investments in the coming quarters, disposable income boosts from EPF Account 3 withdrawals and civil servant salary increases of 7-15% to be implemented over two phases – in December this year and January 2026.

Growth driven by private consumption is not sustainable. We need investments. It is translating approved investments to actual that our growth trajectory will be upward. So, it is good news but let’s not get carried away. And if you ask someone in B40 or M40, they cannot see the bright spot. They are still working on two jobs to put food on the table!

References:

Malaysia GDP growth accelerates to 5.9% in Q2, Norman Goh, Nikkei Asia, 16 August 2024

Malaysia economy’s 5.9% surge in Q2 underpinned by robust household spending, John Gilbert, The Sun, 18 August 2024