Solid performance comes as cooling global demand is expected to weigh on export-oriented Southeast Asian economy.
Malaysia’s economy picked up in the first quarter buoyed by firm domestic demand, central bank and government data showed on Friday.
Gross domestic product rose 5.6 percent, according to Bank Negara Malaysia (BNM) and the Statistics Department, faster than the 4.8 percent annual expansion forecast by analysts in a Reuters news agency poll. In the fourth quarter of 2022, the economy had grown 7.1 percent, revised up from a previously announced 7.0 percent.
Growth hit a 22-year high of 8.7 percent last year as Malaysia bounced back from a pandemic slump, but cooling global demand is expected to weigh on the outlook for the export-oriented Southeast Asian economy.
The central bank, however, said robust domestic demand will continue to drive economic expansion, maintaining its 2023 growth forecast at between 4 percent and 5 percent.
Malaysia’s quarterly expansion was supported by improved labour market conditions, a continuation of large infrastructure projects and a recovery in tourism, BNM Governor Nor Shamsiah Mohd Yunus told a press conference.
“The economy is no longer in crisis and in fact, continues to gain strength,” she said.
“Risks to the growth outlook are fairly balanced, with downside risks emanating primarily from external factors.”
Nor Shamsiah flagged persistent risks to inflation, and did not discount a further normalisation of its benchmark interest rate after the central bank’s surprise 25-basis-point hike last week, citing evolving global developments.
Some economists had seen the rate hike – which marked the return of borrowing costs to pre-pandemic levels – as signalling the end of the central bank’s tightening cycle.
“Any normalisations will depend on whether there will be any developments that will materially affect our assessment of the inflation and growth outlook,” Nor Shamsiah said, when asked to comment on whether BNM was done hiking rates.
BNM has said it expects core and headline inflation to moderate but remain elevated over the course of 2023.
It expects headline inflation to average between 2.8 percent and 3.8 percent this year, compared with 3.3 percent in 2022.