Malaysia’s economy grows at the fastest pace in Southeast Asia, expanding 8.7 per cent in 2022.
The 8.7 per cent is also the country’s fastest since 2000, although the pace in the fourth quarter (Q4) of 2022 slowed to 7.0 per cent from the blistering 14.2 per cent in the preceding quarter.
While the growth its slower than the two previous quarters, economists agreed that the momentum was picking up for Malaysia as 2023 global outlook was gradually improving.
Universiti Kuala Lumpur Business School economic analyst Associate Professor Aimi Zulhazmi Abdul Rashid said continuous recovery of all sectors augured well for a good momentum into the new year. This was despite slower economic growth anticipated globally.
Developed economies in the US, the UK and Europe are still struggling with the high inflationary figures resulting in increased interest rates by their respective central banks.
“As an opened economy, Malaysia is highly intertwined with the global economy, hence a gloomy global scenario will hamper the economic growth of our country starting from Q1 of 2023,” he told the New Straits Times.
Economist DR. Nungsari Ahmad Radhi said on a quarter-on-quarter basis, there was a loss of growth momentum in Q4 versus Q3 and that was worrying going into Q1 2023.
“But the 2023 global outlook is improving slightly and inflationary pressures seem to have come off their peaks, which augur well for everyone including government as expenditures for subsidies will be lower.
“For Malaysia, the ‘dividends’ from commodity exports will be less in 2023, but a global recovery will be good for our manufacturing sector.”
Nungsari said beyond that, the country had to improve its public finances, governance, innovation, human resource and education, among others.
This is to enable local firms to be competitive and come up with new products as well as becoming competitive in attracting investments domestically and from foreign direct investment, he added.
Malaysia University of Science and Technology economist Dr Geoffrey Williams said the headline growth data showed a slowdown in annual growth Q4 by more than half compared to Q3.
He said the seasonally adjusted data show a completely different picture which was not at all rosy.
“In terms of the drivers of growth, private consumption fell 2.9 per cent, investment was flat at only 0.3 per cent growth and government expenditure fell by 5.4 per cent as the pre-election boom ended.
“This is consistent with a significant change in what we call the Great Transition to a new phase of economic performance. It is what we have predicted for some time now even if other forecasters have not seen it yet.
“It reflects the deep damage done by the lockdowns and the policy mistakes of pushing excessive demand last year forcing growth that is inconsistent with the underlying supply potential of the economy. This is one reason for the high inflation and higher interest rates,” he explained.
“The Q4 contraction is the first stage of a technical recession,” he added.
Juwai IQI chief economist Shan Saeed said the firm shared in its August update last year that the gross domestic product (GDP) should meander around 6.5-7.0 per cent. But at 8.7 per cent, it it had exceeded expectations.
Hence, Malaysia has become one of the leading players in Asean.
“It boils down to macroeconomic stability, strong domestic demand and above all solid trade and commerce numbers to bolster the GDP outlook.
“Monetary and fiscal policy levers are working in tandem and structural issues are addressed to keep the growth momentum moving despite global economic instability and financial turmoil in equity and bond markets,” Shan said.