Malaysia: Q1 GDP surprised to the upside – UOB

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting assess the latest GDP releases in the Malaysian economy.

Key Takeaways

“Real GDP strengthened to 5.0% y/y in 1Q22 (4Q21: +3.6%), much higher than our estimate (4.5%) and Bloomberg market consensus (4.0%). On a seasonally adjusted quarter-on-quarter basis, real GDP rose by 3.9% (4Q21: +4.6% q/q).”

“Growth was driven by expansion in services (+6.5%), manufacturing (+6.6%), and agriculture (+0.2%), cushioning the persistent weakness in construction (-6.2%) and mining (-1.1%) sectors. Domestic demand rebounded by 4.4%, led by stronger private consumption (+5.5%), an uptick in private investment (+0.4%), and higher public consumption (+6.7%). Inventory restocking added 2.2pts to overall growth, offsetting a drag from net trade (-1.5ppts).”

“With a strong start to the year and further support from reopening of international borders as well as easing of restrictions, we expect GDP growth to stay robust. Low base effects will also provide a fillip to growth. Key challenges are mainly from the external side such as broader risks related to the Russia-Ukraine crisis, effects of Fed's aggressive tightening path, extended slowdown in China's economy, global supply chain disruptions, elevated inflation pressures, and potential threat of new COVID variants. We keep our full-year growth forecast at 5.5% (2021: 3.1%, official est: 5.3%-6.3%).”