However, it expects the country’s economic expansion to slow down in the second half (H2) as pent-up demand eases.

“Furthermore, the softening global economic outlook and tighter monetary conditions will also weigh on exports and investment,” the research unit said in a statement.

Fitch’s forecast now lies within the Bank Negara Malaysia (BNM) growth target of 5.3% to 6.3% but remains below the Bloomberg consensus of 6.1%.

The 8.9% y-o-y Q2 growth shows an acceleration from 5% reported in the previous quarter. This marks the most substantial expansion since Q2 2021 and translates to a cumulative growth of 6.9% for H1 2022.

Examining the growth breakdown, Fitch observed that the boost to headline GDP growth was primarily driven by a sharp increase in private consumption (18.3% y-o-y) due to the reopening of borders and lifting of Covid-19 restrictions.

For the quarter, the transport subcomponent surged by 91% y-o-y, while recreation services also spiked by 75.1% y-o-y.

“Furthermore, the normalisation of economic activity also supported this year’s growth in gross fixed investment which accelerated to 5.8% y-o-y in Q2, from 0.2% in Q1. Exports of goods and services also benefitted from the lifting of border restrictions.

Overall, exports grew by 10.4% y-o-y in real terms in the quarter, an improvement over the 8% expansion reported in Q1, mainly attributed to a sharp acceleration in the export of services which grew 49.1% y-o-y, compared with 20% in the previous quarter.

Meanwhile, exports of goods saw a slight pick-up to 7.4% in Q2 from 7.1% in Q1.