Malaysia's Economic Expanded Moderately in Q2 2023

Malaysia’s Economic Expanded Moderately in Q2 2023

Malaysia's Economic Expanded Moderately in Q2 2023

Malaysia’s economy expanded moderately in the second quarter of 2023 at 2.9% compared to the first quarter of 2023 at 5.6%. 

According to Bank Negara Malaysia (BNM), this growth was weighed mainly by slower external demand. The domestic demand remains as the key force of growth which is also supported by private consumption and investment. Further growth in employment and wages drove up household spending. 

Meanwhile, investments were underpinned by capacity expansion, progress of multi-year projects and higher fixed asset spending by the government. In the meantime, BNM also observed a continued recovery of inbound tourism which partially offsets the slower goods export growth. 

Growth during the quarter was also mainly affected by the high base effect in the second quarter of 2022 when the economy experienced strong growth from the reopening of international borders and policy measures. On the supply side, the services and construction sectors contributed a lot to the growth. Meanwhile, production in the agriculture as well as mining sectors were affected by the hot weather and plant maintenance. 

On a quarter-to-quarter seasonally-adjusted basis, the economy grew by 1.5%. For better comparison, the first quarter of 2023, it showed us 0.9%. 

Lastly, headline inflation during the quarter continued to moderate to 2.8% (Q1 2023: 3.6%). The moderation was recorded for both core and non-core inflation. 

As for non-core inflation, the decline was attributed to fresh food and fuel. 

As core inflation declined, it has remained relatively stable to its long-term average ( 2011-2019: 2.0%). 2Q 2023: 3.4% and 1Q 2023: 3.9% respectively was largely contributed by selected services such as food away from home, telephone and telefax services and personal transport repair and maintenance. 

Related link: Ringgit Opens Slightly Higher Than The US Dollar

Inflation declined as the share of consumer price index (CPI) items recorded monthly price increases moderately to 42.7% during the quarter (1Q 2023: 56.0%), below the second long-term average (2011-2019) of 43.9%. Understandably, inflation dropped in June after a transitory uptick in May following the festive season. 

In terms of exchange rate developments, the ringgit depreciated by 5.8% in the second quarter of 2023. However, the ringgit did appreciate by 1.1% so far over the third quarter (as of 15 August 2023), amid growing expectations that monetary policy tightening in the United States is nearing its end.

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