Malaysia’s economic growth misses estimate as exports to China fall


KUALA LUMPUR – Malaysia’s economy grew at a slower-than-estimated pace in the fourth quarter as exports to China fell, signalling that a firmer recovery is taking longer than expected.

Gross domestic product grew 3.4 per cent in the October to December period from a year ago, according to advance estimates released by Malaysia’s Department of Statistics on Jan 19. That is lower than the 4.1 per cent median estimate in a Bloomberg survey.

A slowdown in construction and stagnant manufacturing activity weighed on the economy, which grew 3.8 per cent all of last year, below the central bank’s estimate of about 4 per cent expansion in 2023. The final figures will be released on Feb 16. 

Malaysia is grappling with falling exports that have been dragged by China’s sputtering economy. Shipments of goods abroad fell 10 per cent from a year earlier in December, the Ministry of International Trade and Industry said on Jan 19, with sales to China, its largest trading partner, shrinking 1.5 per cent.

Bank Muamalat Malaysia’s Mohd Afzanizam Abdul Rashid said: “Weak external demand has been the main reason for slowing growth in 2023. The slowing Chinese economy certainly plays a role. 2024 is still in cautious mode.”

Malaysia’s ringgit pared earlier gains to trade little changed at 4.7207 against the US dollar at 1.46pm local time following the disappointing data.

Malaysia’s growth trajectory for 2024 is still fraught with risks both externally and at home. While Prime Minister Anwar Ibrahim has dismissed alleged plots to bring down his administration, concerns over political stability prevail as he seeks to execute business-friendly plans while reducing government debt.

“Renewed political instability that creates more hurdles for bold policy reforms and restoring market confidence would be key threats on the local front,” said analysts at BIMB Securities ahead of the Jan 19 data.

On the external front, a potential fallout in the Middle East crisis, over-restrictive global monetary policy conditions and financial contagion fears especially from China also pose risks to the domestic economy, they said.

Still, BIMB Securities expects the benchmark interest rate to remain anchored at 3 per cent through 2024, with continued focus on the balance of risk between Malaysia’s growth and inflation outlook.

The market will closely watch Bank Negara Malaysia’s statement at the monetary policy meeting next week for clues on the path of interest rates. The central bank will likely keep its key rate steady for a fourth straight meeting on Jan 24, according to all nine economists surveyed by Bloomberg so far. The overnight policy rate is at a record discount relative to the Federal Reserve’s rate. BLOOMBERG



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