Bank Negara: Malaysia’s economy grew 3.3pc in third quarter fuelled by strong spending

KUALA LUMPUR, Nov 17 — Malaysia’s economy grew 3.3 per cent in the third quarter, performing marginally better than expected in a positive momentum from the previous half of the year built on the back of stubborn consumer spending despite weaker global trade.

Bank Negara Malaysia (BNM) said today the July-September period performance improved on a quarterly basis, slightly besting the second quarter with the expectation that household spending would remain the anchor for growth. GDP grew at 2.9 per cent for the April-June period.

“Weaker external demand is cushioned by resilient domestic spending,” BNM governor Datuk Abdul Rasheed Ghaffour said at a media briefing here today.

Data on household consumption shows consumers have not wavered from spending, likely buoyed by record-level confidence of businesses to expand hiring.

BNM said the labour rate participation is at a historical high, at 71 per cent, as companies showed an appetite to grow their workforce.

A positive labour market has led to improved income levels, the central bank said, as it forecasts employment expansion to continue towards the rest of the year.

Targeted cash transfers and early incentive payments for civil servants have also driven spending, Abdul Rasheed said.

Nominal private sector wages per worker grew by a full 3.8 basis points in the third quarter, the central bank data showed.

By sectors, services continued to record higher wages since the fourth quarter of 2019. Wages in manufacturing, one of the country's key industries, dropped in the same period but still at one basis point higher than the last quarter in 2019.

The services and construction sectors led private sector growth with both improving from the April to June period.

But exports declined by 12 per cent as geopolitical tension and climate effects took a toll on demand although the bank expects the situation to improve from the tech cycle downturn next year. Manufacturing, agriculture and mining all registered negative growth.

The contraction in exports has been largely cushioned by higher tourism receipts, the central bank said. Third quarter tourism receipts totaled just over RM18 billion. Abdul Rasheed said tourism revenue has reached 68 per cent of pre-pandemic peak.

Disinflation

Inflation came in at 2 per cent in the third quarter, and is expected to remain modest going into next year, according to the central bank's estimates. Core inflation data showed normalisation as price rises of food goods, services and transport services showed signs of slowing down.

But domestic factors could still weigh on inflation. The central bank said the plan to roll back blanket subsidies in place of a more targeted system for next year and a continued depreciation of the ringgit could pose some risk.

"There are many factors that would affect how the adjustments' impact on inflation, including specific timing and magnitude...the government did mention it would introduce targeted subsidies and this would reduce the impact in terms of inflation," he said, adding that the government could tighten enforcement and stricter price controls as measures to deal with the expected spike in prices.

The BNM governor also downplayed concerns about the ringgit. The Malaysian currency is now around 6 per cent against the U.S. dollar this year, one of the region's weakest performers. saying it did not reflect strength in the economy.

"In the longer run, we believe that the ringgit will reflect the underlying fundamentals that have been quite strong," the BNM governor said.

BNM said it expects this year's growth forecast — at about 4 per cent — to be on track.