Bank Negara Malaysia (BNM) announced last Friday the country’s Q3 GDP rose 14.2% year-on-year (y-o-y), partly boosted by base effects due to heavy Covid restrictions in Q3 2021.
It noted that the GDP grew by 9.3% in the first nine months of 2022 as a result of robust Q3 growth.
“We therefore raise our 2022 GDP growth forecast to 8.2% from 7%. Private consumption remains the main growth driver on a y-o-y basis, accounting for 65% of Q3 GDP growth.
“But on a quarter-on-quarter (q-o-q, seasonally adjusted) basis, growth in household spending may have already peaked, as Covid-induced pent-up demand normalised and previous spending support (such as early pension fund withdrawal and car sales tax exemption, which expired in June) faded,” the research team added.
Meanwhile, net exports added one percentage point (ppt) to y-o-y GDP growth, as export growth outstripped import growth. The robust growth in Q3 has been driven not just by higher prices but also volume growth.
“In particular, the electrical and electronics segment, as well as commodity exports, have been key drivers of export growth.”
While Malaysia’s exports have outperformed regional economies, export growth may have peaked and growth may moderate in the quarters ahead amid a global growth slowdown and a likely semiconductor down cycle, it added.
Investment also contributed a strong 2.5 ppt to GDP growth, led primarily by private investment, it said.
“Investment expanded 2% q-o-q in Q3, driven by private investment, while public investment was lacklustre by our estimates.
“On a y-o-y basis, private investment contributed 10.6 ppt to overall investment growth, while public investment added only 2.6 ppt. Both benefitted from a low base effect in Q3, but public investment underperformed,” the report said.
It added that private investment was driven by high capex expenditure by services and manufacturing firms, according to BNM.
Household spending moderated or contracted q-o-q across most categories. The largest contraction was observed in the transport category, which saw a high base in Q2 as purchases of motor vehicles were front-loaded to take advantage of the sales tax exemption (which expired on June 30).
Excluding the transport category, consumer spending may have been flat q-o-q.
“Spending on household furnishing contracted mildly in Q3, while that on food and beverages and apparel was flat versus Q2, potentially reflecting the impact of higher prices on growth.”
Meanwhile, recreation and restaurants and hotels continued to grow strongly in Q3, likely supported by pent-up demand and reopening of international borders globally.
“However, the moderating pace of growth may suggest that we have already observed the peak in consumer spending growth, as pent-up demand normalises and earlier spending support dissipates,” the research team added.