KUALA LUMPUR: Malaysia’s economy grew faster than expected in the first quarter of 2024, helped by household spending and a turnaround in exports, although some analysts say the rebound could be short-lived with price pressures set to increase.
Gross domestic product rose 4.2% in the January to March period from a year earlier, central bank and government data showed recently, surpassing the 3.9% growth forecast by a Reuters poll and advance estimates released by the government. Annual growth in the final quarter of 2023 was revised down slightly to 2.9%.
Exports rose 2.2% on an annual basis in the first quarter, after three consecutive quarters of contraction, Bank Negara and the Statistics Department said at a joint press conference.
“Exports are expected to improve for the year supported by sustained demand,” governor Datuk Abdul Rasheed Ghaffour said.
Risks to expansion include weaker-than-expected global growth, lower commodity prices, and further escalation of geopolitical conflicts, he said.
On a quarter-on-quarter seasonally adjusted basis, the Malaysian economy grew 1.4%, compared with a 1% contraction in the fourth quarter of last year, the data showed.
The central bank maintained its 2024 economic growth projection of 4% to 5%. The economy expanded 3.7% in 2023, a sharp drop from a 22-year high of 8.7% in 2022.It projected headline inflation at 2% to 3.5% for the year, taking into account planned subsidy and price control adjustments. Last year, it was 2.5%.
Malaysia is seeking to do away with broad-based subsidies as it looks to boost revenue and better channel aid to lower-income groups.
Analysts said consumer spending could be affected by rising costs, while the recovery in exports may slow down amid weaker demand from the United States, a major trade partner.
“The possibility of higher overnight policy rate is something that we can’t totally rule out,” Mohd Afzanizam Abdul Rashid, chief economist at Bank Muamalat Malaysia said, referring to a potential rise in the overnight policy rate, Bank Negara’s benchmark interest rate.
Shivaan Tandon of Capital Economics said Malaysia’s economic growth was encouraging but unlikely to be sustained.
“The softening labour market, tighter fiscal policy and soft foreign demand are all likely to weigh on economic activity in the coming quarters,” Tandon said.
Bank Negara has held its policy rates steady since May 2023, when it was raised by 25 basis points to 3.00%. At the last policy meeting, the central bank flagged inflation risks as it continued measures to shore up the ringgit.
Abdul Rasheed had said monetary policy remained supportive of the economy. — Reuters
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