Malaysia's 2022 GDP set to post highest growth in ASEAN - Research firms

Additionally, the GDP growth for the fourth quarter of 2022 (4Q 2022) is expected to reach 5.7 per cent.

Bank Islam chief economist Firdaos Rosli said this would be a better-than-expected forecast despite the political turmoil which began in early 2020 and subsided in the 15th General Election (GE15) in November last year, which culminated in the formation of a multi-coalitional government.

"Furthermore, the ringgit reached a historical high of RM4.746 in early November 2022, pressured by the widening interest rates and bond yield differentials.

"We posit that such compelling growth was bolstered by the continued expansion in the domestic demand and a firmer recovery in the labour market, aside from the low-base effect factor," he said in a note today.

Firdaos said that although the Malaysian economy would continue to grow in 2023 amid a global slowdown, a recession would be less probable to occur as the country's macroeconomic fundamentals remain solid.

He said that private consumption would continue to be the primary driver of economic growth throughout the year, in addition to China's reopening prospect that could help limit the decline.

Firdaos also noted that private investment would remain contentious despite the overnight policy rate being lower than during the pre-pandemic levels.

"That said, we project our economy to grow by 4.5 per cent in 2023 sans the impact of China's economic reopening and subsidy rationalisation.

"For the record, the latest multilateral development banks' (forecasts) project Malaysia to grow between 4.0 per cent and 4.4 per cent in 2023," he said.

Moving forward, Firdaos opined that sustaining Malaysia's post-pandemic growth rates would be key amid the global slowdown and impending state elections to ensure the government gains ample fiscal headroom to undertake reforms in the future.

Hence, he said the short-term policy goals would be more prominent than long-term ones in the coming weeks.

"The government is expected to outline some of these goals when re-tabling Budget 2023, and the remaining ones in the review of the 12th Malaysia Plan in 3Q 2023.

"We believe the government will not rule out the re-implementation of the Goods and Services Tax and (keep) subsidy rationalisation cards close to its chest for now," he added.

On another note, Maybank Investment Bank Bhd has estimated real GDP to grow at 6.0 per cent in 4Q 2022, giving the full-year 2022 growth at 8.5 per cent, but it would decelerate to 4.0 per cent this year.

The bank said that single-digit GDP growth persisted in January 2023, taking the cue from the downtrend in the manufacturing purchasing managers' index.

This was also based on indicators suggesting slower growth in 4Q 2022, including the industrial production index, volume of services index and the value of construction works, it said.

Meanwhile, Hong Leong Investment Bank Bhd (HLIB) in its note revised its 4Q 2022 GDP growth estimate upward to 6.8 per cent from its preliminary estimate of 5.5 per cent following the release of the latest indicators, adding that the estimate would still point to a slowdown from the preceding quarter.

"Growth is expected to be weighed down by moderation in most sectors, including manufacturing and services.

"On the demand side, growth is anticipated to be buoyed by private consumption, albeit at a slower pace.

"In line with the revision, we see upside bias to our 2022 GDP forecast of 8.2 per cent, pending the release of actual 4Q 2022 print," it said.