Malaysian economy grows faster than expected, household spending is in focus

Malaysia expects economic growth to be near 5 per cent this year, following a stronger-than-expected performance in the second quarter. According to the central bank and statistics department, the country’s gross domestic product (GDP) increased by 5.9% in April-June compared to last year, surpassing the earlier estimate of 5.8%. The economy grew by 2.9% every quarter from the previous three months.

Growth in the quarter was driven by stronger household spending, positive labour market conditions, and a pick-up in exports and investment activities, Bank Negara Malaysia (BNM) and the Statistics Department said at a joint press conference.

Full-year growth was now expected to be at the upper end of the central bank’s forecast of 4%-5% growth in 2024, BNM Governor Abdul Rasheed Ghaffour said.

“Household spending will remain the anchor of growth for the rest of this year, with continued expansion in employment and income as well as larger policy support and … strong investment activities,” he said. The economy expanded 3.7% in 2023, a sharp drop from a 22-year high of 8.7% in 2022.

Malaysia’s exports witnessed an annual increase of 9.1% in April and 7.3% in May, but growth slowed to 1.7 per cent in June. Government data indicated that exports grew by 3.9% in the first half of 2024.

The ringgit has rebounded since reaching a 26-year low against the US dollar in February, gaining 3.3 per cent so far this year. This recovery was partly attributed to expectations of US policy rate cuts, which eased pressure on regional currencies, according to Bank Negara Malaysia (BNM).

The central bank maintained its key interest rate at 3.00 per cent in July. Inflation would remain under control, despite a rising trend following diesel subsidy cuts in June, the central bank said on Friday.