Malaysia estimates economy grew faster in Q2

KUALA LUMPUR :Malaysia's economy is expected to have expanded at a faster clip in the second quarter than the first, government advance estimates showed on Friday, though some analysts expect momentum to ebb from higher inflation and weak domestic spending.

Gross domestic product for the April-June quarter was forecast to have expanded 5.8 per cent from a year earlier, statistics department data showed, compared with annual growth of 4.2 per cent in the first quarter, which came in stronger than expected.

Chief statistician Mohd Uzir Mahidin said the estimated growth was driven by the services sector, which recorded expansion of 5.6 per cent versus 4.7 per cent in the previous quarter.

The growth would be further bolstered by better performances in the wholesale and retail trade, transportation and storage, and finance and insurance sub-sectors, Mohd Uzir added.

"In the external sector, the total trade, exports and imports experienced an increase as compared to the same period last year," he said in a statement.

Malaysia's exports in June rose 1.7 per cent from a year earlier, below market expectations, government data showed on Thursday.

Exports recorded an annual growth of 3.9 per cent in the first half of 2024, the trade ministry said.

For the first half of 2024, GDP rose 5 per cent compared with 4.1 per cent in the same period last year, according to the statistics department.

Malaysia's economy is expected to continue its growth momentum, supported by domestic and export-driven factors, with a positive outlook for the remainder of the year, the department added.

The government and central bank have projected economic growth of 4 per cent to 5 per cent in 2024.

Analysts expect economic growth to cool in the coming quarters as an uptick in inflation from ongoing and planned subsidy and price control adjustments set in.

"GDP growth accelerated sharply in the second quarter but with a jump in inflation set to curtail consumer spending and the boost from tourism likely to fade, we still expect a sharp slowdown in the coming quarters," Shivaan Tandon, economist at Capital Economics, said in a research note.

Sheana Yue, economist at Oxford Economics, said June trade data released on Thursday suggests that final second quarter GDP figures will come in lower than estimated as domestic demand looks likely to remain subdued.

Last week, the central bank held its key interest rate steady at 3.00 per cent, saying inflation would remain manageable even as it trended higher following diesel subsidy cuts last month.

Bank Negara Malaysia (BNM) also said resilient domestic spending, higher exports, and a pick-up in tourist arrivals pointed towards sustained strength in economic activity.

It maintained its projection for headline inflation to range between 2 per cent and 3.5 per cent for the year.

The official second quarter GDP figures are expected to be released on Aug. 16.