Analysts upgrade forecast on Malaysia’s 2022 GDP

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Considering the stronger-than-expected growth in 3Q22, MIDF Research adjusted its 2022 GDP growth projection higher to eight per cent from 6.6 per cent previously. — Bernama photo

 

KUCHING: Analysts’ gross domestic product (GDP) growth projection currently ranges from seven to eight per cent, on the back of strong growth in the the third quarter of current year 2022 (3Q22).

For RHB Investment Bank Bhd (RHB Investment Bank), the research firm’s 2022 GDP growth estimate is seven per cent year on year (y-o-y).

“The balance of risks to our estimate is tilted towards a print of 7.5 to 8.5 per cent on back of stronger than expected 3Q22 GDP growth and potential resiliency of economic acitivity in 4Q22 (though at a slower pace),” RHB Investment Bank said

“The economy grew by 9.3 per cent y-o-y in the first three quarters of the year.

“In the succeeding one to three quarters, we expect GDP growth to slow to trend or slightly below it till the first half of 2023 (1H23), followed by a recovery in 2H23.

“Our 2023 GDP growth forecast is maintained at 4.5 per cent y-o-y. Our trend growth estimate on an annual basis is around five per cent y-o-y.”

According to RHB Investment Bank, a slow-down in 1H23 is anticipated as low base effects wear out, external conditions weaken, and much of the tailwinds from loose fiscal and monetary policy along with pent up demand moderate.

On the domestic front, the research firm expected gradual moderation in consumer spending amid dissipation of pent-up demand and elevated living costs.

“In addition, early signs of slowdown in labour market conditions might become evident in 1H23 amid softening growth in service sector and tourism activities.

“The main areas of weakness in economic activity in 1H23 will be manufacturing and tourism related sectors. Commodity oriented sectors could remain resilient, though at a slower pace compared to 2022.”

As such, RHB Investment Bank maintained its 2023 GDP projection at 4.5 per cent y-o-y.

Meanwhile, considering the stronger-than-expected growth in 3QCY22, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) adjusted its 2022 GDP growth projection higher to eight per cent from 6.6 per cent previously.

“Even with zero per cent quarter on quarter (q-o-q) in the next quarter, the 2022 GDP growth would be at least 7.7 per cent,” MIDF Research said.

“Continued improvement in income and positive labour market condition will continue to support consumption activity in the final quarter of 2022 and going into 2023.”

However, the research arm kept a cautiously optimistic view that Malaysia’s economic growth will be supported by growing activities in the domestic economy, but the outlook may be impacted by uncertainties from external front.

“New orders and export orders contributed to the deterioration in manufacturing purchasing managers’ index (PMI), indicating signs of slowing demand.

“Moreover, external demand could slow in the event of global slowdown as final demand is expected to be constrained by sharp rise in borrowing costs following policy tightening by major central banks.

“As for domestic front, the outcome of GE15 will determine the magnitude of political risk to Malaysian economy.

“In the event of a prolong hung parliament, this may pose economic risk particularly on government expenditure, upcoming Budget 2023 and implementation of public policies.”