Malaysia: Economy records fastest expansion since Q4 2022 in Q2
GDP reading: GDP growth sped up to 5.9% year on year in Q2 from 4.2% in Q1, marking the best result since Q4 2022. Q2’s uptick exceeded both market expectations and the 5.8% rise reported in the preliminary release. The upturn reflected improvements in private consumption, fixed investment and exports. On a seasonally adjusted quarter-on-quarter basis, economic growth also gathered momentum, accelerating to 2.9% in Q2, compared to the previous quarter’s 1.5% growth.
Drivers: Looking at the details of the release, private consumption rose by 6.0% year on year in the second quarter, which marked the best reading since Q1 2023 (Q1: +4.7% yoy). A favorable labor market—including low unemployment, the highest labor force rise since 2013 and record-high employment—led the upturn. Moreover, fixed investment growth sped up to 11.5% in Q2, above the 9.6% increase recorded in the previous quarter, thanks to robust capacity-building in the manufacturing and services sectors plus rising FDI inflows. Less positively, government consumption growth slowed to 3.6% (Q1: +7.3% yoy).
On the external front, exports of goods and services growth improved to 8.4% year on year in the second quarter, which marked the best reading since Q4 2022 (Q1: +5.2% yoy). Meanwhile, imports of goods and services growth sped up to 8.7% in Q2 (Q1: +8.0% yoy), marking the best reading since Q3 2022. Overall, net trade contributed positively to GDP growth for the first time in a year.
GDP outlook: Looking ahead, growth is projected to ease from H1 levels in H2 as higher inflation and elevated interest rates cap domestic demand. That said, over 2024 as a whole, the economy will expand faster than both 2023 levels and its prior 10-year average, uplifted by the global electronics sector upcycle, strong government spending, major infrastructure projects and robust tourist inflows.
Panelist insight: Nomura analysts Euben Paracuelles and Yiru Chen commented on the outlook:
“We remain optimistic on the growth outlook and reiterate our 2024 GDP forecast of 5.2%, exceeding the BNM’s? forecast range of 4.0-5.0% and well above the consensus forecast of 4.6%. […] Export growth should strengthen further, led by electronics, amid the global tech turnaround and supply-chain diversification. We also continue to expect domestic demand, particularly household consumption, to hold up, thanks to the positive spillovers from stronger export growth, via resilient labor markets and wage growth.”
United Overseas Bank analysts Julia Goh and Loke Siew Ting said:
“We revise our 2024 GDP growth forecast higher to 5.4% but maintain a 4.7% growth projection for 2025. […] Key growth catalysts include the upturn in global tech cycle, increasing tourism activities, continued government cash aids for targeted groups as well as persistent implementation of budget measures and catalytic initiatives outlined under the national master plans amid stable labour market conditions.”