KUALA LUMPUR, August 19 – Malaysia’s economy grew by 2.9 percent in the second quarter of 2023, supported by an improving labor market, sustained growth in domestic demand, and tourism activities, according to the Department of Statistics Malaysia (DOSM). Chief Statistician of Malaysia, Datuk Seri Mohd Uzir Mahidin, stated that the moderate growth of Malaysia’s economy in that quarter was partially due to slower external demand due to the global technological cycle, lower commodity production, and the higher base effect from the second quarter of 2022 which recorded a GDP growth of 8.9 percent.
Malaysia recorded a GDP growth of 5.6 percent in the first quarter of 2023, making the average growth for the first half of this year 4.25 percent. Based on seasonally adjusted quarter-to-quarter data, the country’s economy grew by 1.5 percent (first quarter of 2023: 0.9 percent). Meanwhile, the Governor of Bank Negara Malaysia (BNM), Datuk Abdul Rasheed Ghaffour, stated that Malaysia’s economy remains on track to achieve a GDP growth between 4.0 and 5.0 percent this year, driven by continued labor market recovery, project implementation, and increased tourism activities.
The MADANI Economic Framework will drive a comprehensive restructuring of Malaysia’s economy, he said at a press conference here on Friday. He said overall inflation is expected to be between 2.8 percent and 3.8 percent in 2023 following core inflation moderation and gradual subsidy rationalization. “Core inflation, while declining, remains elevated compared to the long-term average (average 2011 to 2019: 2.0 percent),” he said. Abdul Rasheed said non-core inflation and core inflation have become moderate, with fresh food and fuel contributing to the decline in non-core inflation.
While the moderation of core inflation (second quarter of 2023: 3.4 percent; first quarter of 2023: 3.9 percent) is largely attributed to selected services. This includes eating out, telephone and fax services, and the repair and maintenance of personal transportation, he said. “Inflation volatility decreased when the portion of the Consumer Price Index (CPI) that records monthly price increases moderated to 42.7 percent in the second quarter (first quarter of 2023: 56.0 percent), which is below the long-term average of the second quarter (2011 to 2019) at 43.9 percent.
“Importantly, inflation volatility subsided in June after a temporary increase in May due to festive seasons,” he said. For the second half of 2023, overall inflation and core inflation are projected to remain at a low trajectory according to expectations, partly due to a higher base in the second half of 2022. Abdul Rasheed said, however, the risks to inflation forecasts depend on domestic policy changes regarding subsidies and price controls, as well as global commodity prices and financial market developments. Moving forward, the Governor of BNM said economic growth will continue to be driven by domestic demand.
Following increased energy use and income, as well as the implementation of multi-year projects. Arrivals of tourists are expected to continue to increase, thus supporting tourism-related activities, he said. “The risks to Malaysia’s growth prospects hinge on the risk of growth slowing down, primarily due to weaker-than-expected global growth. However, there are factors that could drive higher growth risks, such as stronger-than-expected tourism activities and faster project implementation,” he said.