KUALA LUMPUR, Oct 31 — MIDF Research has maintained its forecast for Malaysia’s gross domestic product (GDP) growth at 6.6 per cent despite concerns over external developments.
In a note today, the research firm said recent indicators showed sustained positive growth with expanding domestic demand and robust external trade performance.
“Apart from reopening of the economy and relaxation of Covid-19 standard operating procedures (SOPs), we expect the recovery in the domestic labour market and improved employment prospects to support domestic spending activity.
“Meanwhile, businesses increased production as demand improved following the economic reopening,” it said, adding that more sustained and robust growth in domestic economic activities will support stronger GDP growth this year.
It also noted that Malaysia’s leading index (LI) still points to sustained growth as it rose four per cent year-on-year (y-o-y) to 111.3 points in August 2022, indicating that the economic growth momentum will continue moving forward.
Meanwhile, the current economic condition showed a more normalised growth as the rise in the coincident index moderated further to +9.8 per cent y-o-y, mainly due to the increase in industrial production and retail trade as well as higher capacity utilisation.
“Given the sustained growth in LI, we expect the growth momentum to remain positive in the coming months with the pace of growth expected to normalise as the low-base effect, as a result of the nationwide lockdown last year, diminishes,” the firm said.
The Industrial Production Index (IPI) recorded better-than-expected growth. It accelerated +13.6 per cent y-o-y due to stronger growth in manufacturing output, in line with the stronger export performance.
“The pick-up in IPI growth signals stronger production activities in July-August 2022, indicative of robust GDP growth in the third quarter of the 2022 calendar year.
“This shows that business activities, including production, continued to grow on the back of increasing demand, both domestic and external,” it said.
As the core Consumer Price Index inflation rose to a new high at +4.0 per cent y-o-y in September 2022, MIDF Research believes that Bank Negara Malaysia will continue to hike the overnight policy rate by another +25 basis points at the November 2022 Monetary Policy Committee meeting.
However, MIDF said there is a slowdown in manufacturing sector activities — due to weaker new orders including export demand — amid concerns over slowing global demand.
These caused the manufacturing Purchasing Managers’ Index to fall below 50 in September 2022 after five straight months of expansion.
“Thus, while growth momentum generally remained positive, we remained cautious of a possible weaker global outlook.
“It may be influenced by monetary policy tightening by central banks, the adverse effect of elevated inflation on final demand, and factors such as geopolitics and labour issues which could affect the stability of supply,” said MIDF.
— Bernama
