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Recovering from the Covid-19 pandemic, Malaysia last week reported its fastest annual growth in 2022 in over two decades, as strong domestic demand helped the country become the fastest-growing economy in Asia. Malaysia GDP rose 8.7% in 2022, the best performance since 2000, the country’s central bank and statistics department data showed.
A survey done by Bloomberg was expecting the economy to grow at 8.6% last year, whereas the government had forecast a growth rate of 6.5% to 7%.
What helped Malaysia GDP growth?
The Southeast Asian country reopened from the Covid-19 pandemic in early 2022 and saw pent-up demand pushing growth higher. Bank Negara Malaysia has said that the country is likely to avoid a recession due to the global economic slowdown.
While Malaysia GDP figures crown it the fastest-growing economy in Asia, the title is likely to be short-lived as interest rate hikes and supply chain issues may dampen growth in the coming year.
For the last quarter of 2022, Malaysia GDP growth stood at 7% over the past year, but down 2.6% compared to the previous quarter. The central bank said exports of electrical and electronics goods supported the GDP growth in the fourth quarter.
Bank Negara Malaysia, in a surprise move, left key interest rates steady in January after consecutive hikes during the past year. The falling GDP growth supports the pause in the rate hike cycle.
“The 2.6% q/q contraction in Malaysian GDP last quarter was much weaker than the 0.7% fall we had expected and is certainly not the kind of ‘evolving conditions’ that would persuade Bank Negara Malaysia to resume its tightening cycle after pausing in January. We see very little chance of further rises in the policy rate this year,” writes Alex Holmes, Senior Economist, Oxford Economics.
Meanwhile, the government now sees full-year GDP growth to moderate between 4% to 5% in 2023. “Malaysia will not go into a recession,” central bank Governor Nor Shamsiah Mohd Yunus told reporters. “The economy will continue to grow at a much more moderate pace because of the slower external demand, but it will still be supported by domestic demand.”
Separately, the reopening of China is expected to drive the recovery in the country’s tourism sector, which could prop up domestic demand, offsetting the headwinds from a global economic slowdown.
However, December exports were 6% lower than expected and slower than the double-digit expansion in the past 16 consecutive months. Electronics comprise a major part of the country’s exports, which could be hit due to slowing demand overseas.
