KUALA LUMPUR: The Malaysian economy posts a stronger growth of 8.9 per cent in the second quarter (Q2) of 2022 compared to a five per cent expansion in Q1.
Bank Negara Malaysia said while the gross domestic product (GDP) was lifted to some extent by the low base from the Full Movement Control Order (FMCO) in June 2021, growth in April and May 2022 was particularly robust.
"Domestic demand continued to strengthen, underpinned by the steady recovery in labour market conditions and ongoing policy support. The higher growth was also reflective of normalising economic activity as the country moved towards endemicity and reopened international borders.
"Exports remain supported by strong demand for E&E products. By sector, the services and manufacturing sectors continued to drive growth," Bank Negara said in a statement today.
On a quarter-on-quarter seasonally-adjusted basis, the economy increased 3.5 per cent (Q1 2022: 3.8 per cent).
Bank Negara said with growth in the first half of 2022 at 6.9 per cent, the Malaysian economy was projected to expand further for the remainder of the year.
Its governor Tan Sri Nor Shamsiah explained that while external demand could face headwinds from slower global growth, the Malaysian economy would continue to be supported by firm domestic demand.
"Growth would also benefit from improving labour market conditions and higher tourist arrivals, as well as continued implementation of multi-year investment projects". However, Malaysia's growth remains susceptible to a weaker-than-expected global growth, further escalation of geopolitical conflicts and worsening supply chain disruptions," Nor Shamsiah added.
The central bank said during the quarter, headline and core inflation increased to 2.8 per cent and 2.5 per cent respectively (Q1 2022: 2.2 per cent and 1.7 per cent respectively).
The higher core inflation reflected an improvement in demand conditions amid the high-cost environment, with price increases mainly driven by food away from home and other food items.
Exchange rate developments
Bank Negara said the ringgit depreciated by 4.6 per cent against the US dollar in Q2 (year-to-date until Aug 10 2022: -6.3 per cent), broadly in line with the movement of regional currencies (Q2 2022: -4.7 per cent, YTD: -5.8 per cent).
This largely reflected the continued strengthening of the US dollar following aggressive US monetary policy tightening, increased investors' risk aversion due to the weaker global growth outlook and the military conflict in Ukraine.
Nonetheless, elevated commodity prices and Malaysia's economic recovery helped to cushion the downward impact from the external developments on the ringgit during the quarter.
Bank Negara said while domestic financial markets will continue to be subjected to episodes of heightened volatility, spillovers to domestic financial intermediation were expected to remain broadly contained, supported by Malaysia's healthy external position and strong banking system.
Financing conditions
Net financing to the private sector grew by 4.9 per cent (Q1 2022: 4.5 per cent) amid higher growth in outstanding loans (5.4 per cent, Q1 2022: 4.4 per cent).
Outstanding corporate bond growth moderated (3.4 per cent; Q1 2022: 4.6 per cent) as growth in bond redemptions continued to outpace that of issuances.
Outstanding business loan grew by 5.5 per cent (Q1 2022: 4.3 per cent), following strong expansion in loan disbursements for both working capital and investments.
For households, outstanding loan growth increased further (5.7 per cent; Q1 2022: 4.8 per cent), with higher growth recorded across all loan purposes.
Loan disbursements remained robust amid strong loan demand, particularly for the purchase of cars and houses.
Overall, loan repayments for both the business and household segments have been encouraging upon the lapse of repayment assistance programmes and the reopening of the economy.
Bank Negara expects headline inflation to trend higher in some months during the remainder of the year, due partly to the base effect from the discount on electricity prices implemented in Q3 2021.
Core inflation is expected to average higher in 2022, as demand continues to improve amid the high-cost environment.
The extent of upside pressures on inflation is expected to remain partly contained by the existing price control measures, fuel subsidies and the continued spare capacity in the economy.
Nevertheless, the inflation outlook continued to be contingent on upside risks steming from the strength of domestic demand, global price developments, and domestic policy measures, the central bank said.