KUALA LUMPUR, May 13 — OCBC Bank has maintained its 2023 gross domestic product (GDP) growth forecast of 4.4 per cent for Malaysia, implying weaker growth for the rest of the year but still within Bank Negara Malaysia’s (BNM) four per cent to five per cent forecast range.
In its Treasury Research & Strategy note on Friday, senior Asean economist Lavanya Venkateswaran expects the 2023 current account surplus to narrow to 2.4 per cent of GDP from 3.1 per cent in 2022, slightly below BNM’s 2.5 – 3.5 per cent of GDP range.
“In terms of monetary policy implications, with growth and inflation slowing, we expect BNM to keep policy rates unchanged at 3.00 per cent for the rest of 2023,” she said.
Lavanya said the weakness in 1Q goods exports portends further weakness for the Malaysian economy for the rest of 2023 as the economic recovery in main trading partners remains constrained by still tight monetary policy and elevated domestic interest rates.
Hence, she expects some knock-on impact from weaker external demand onto domestic demand, particularly investment spending, while consumption expenditures moderate.
Lavanya noted the 1Q GDP growth of 5.6 per cent year-on-year (y-o-y) has delivered an upside surprise, however, it shows the weakness in the external sector.
The GDP growth came as a surprise on the upside (consensus and OCBC: 5.1 per cent) against seven per cent in the fourth quarter of 2022 (4Q 2022).
“Notwithstanding the upside surprise, the weakness in the external sector was pronounced,” she said.
Mirroring the weakness in external demand, the 1Q current account surplus narrowed sharply to RM4.3 billion (0.9 per cent of GDP) from RM27.5 billion (5.9 per cent of GDP) in 4Q 2022.
The goods trade surplus narrowed to RM39.9 billion from RM57.7 billion in 4Q while the deficits on the services and primary income accounts widened in 1Q versus 4Q.
The weakness in import growth was broadly consistent with the narrower contribution of 4.3 percentage points (pp) from domestic final demand versus 6.3 pp in 4Q.
Within this, private consumption, government consumption and private investment slowed in 1Q while government investment spending remained supported by large public transportation and utility projects.
From the supply side, Lavanya said growth slowed across all key sectors including agriculture, manufacturing, construction, and services.
The bright spot was for sectors associated with motor vehicle manufacturing and services, which continued to grow in 1Q versus 4Q, consistent with higher car sales for the quarter.