GDP growth in Q3 shows economy is resilient, stabilising

 

Achieving growth when the global economy is facing major challenges is a positive sign for the Malaysian economy.

PETALING JAYA: The gross domestic product (GDP) growth rate of 3.3% in the third quarter (Q3 2023) indicates the country’s economy is stabilising despite the uncertainties over external demand, according to an economist.

“I believe the economy has the potential to grow much higher,” Bank Muamalat Malaysia chief economist Afzanizam Rashid told FMT Business.

He said the 3.3% growth rate in Q3 is a positive development as it demonstrates Malaysia’s domestic demand is resilient enough to endure the decline in net exports. The Q3 economic growth rate rose marginally compared with the second quarter’s 2.9%.

Afzanizam said while the 22.7% contraction in net exports indicates the economy is susceptible to changes in external demand, the domestic engine is able to offset the weakening in external demand.

Afzanizam Rashid.

“Given that consumers remain cautious in their spending while businesses are pessimistic based on the Purchasing Managers Index which has been below the 50-point mark for 14 consecutive months, the Q4 GDP could come in within a similar range of around 3% to 4%,” he said.

Malaysian Institute of Economic Research (MIER) senior research fellow Shankaran Nambiar said the 3.3% GDP growth is “encouraging given the circumstances”.

“Given that external demand was not strong, (the economy) has done well in Q3, and is obviously an improvement over the previous quarter,” he said.

Shankaran Nambiar.

He expects a slight uptick towards the end of the year, spurred mostly by year-end spending.

“I think we can comfortably achieve a rate close to 4% for 2023, at least 3.8% or upwards,” Nambiar said.

On track for improvement

Bait Al Amanah analyst Yugendran T Kannu Sivakumaran concurred that the 3.3% growth rate was “reasonable” in light of global market challenges and the country’s reliance on exports.

He said achieving growth when the global economy was facing various challenges is a positive sign. This also indicates the country’s resilience and effective navigation through these turbulent times.

“In the current circumstances, Malaysia is performing well, and economic recovery is underway. We are on track for further improvement,” he said.

Yugendran opined the current growth momentum can be sustained until Q4 2023, barring any unforeseen global incidents.

“Even if the US Federal Reserve raises rates in December, its impact on the Malaysian economy would likely be minimal, given the expected modest increase of around 0.25%.”

Meanwhile, Malaysia University of Science and Technology economist Geoffrey Williams said the 3.3% GDP growth has mainly been held up by domestic demand.

Moving forward, he said while the growth was a positive development, it also reflects slower growth.

Geoffrey Williams.

“The economy could not really have done much better without a significant fiscal stimulus which would be unwise and unnecessary.

“We saw the pre-election stimulus last year, and now we are seeing the post-election slowdown typical of a political business cycle. Hopefully this will subside in 2024,” he said.

Noting that the economy grew by 3.9% in the first three quarters of 2023, Williams said the GDP will have to grow by 4.4% in Q4 to be inside the 4-5% growth range for the full year.

“It is likely that growth will be below this level at around 3.7% for the full year, and there’s a strong chance of a contraction in Q4,” he said. - FMT