KUALA LUMPUR: Malaysia's economy may have expanded at the fastest rate in six quarter for the second quarter (Q2) of 2024.
The Q2 gross domestic product was expected to expand 5.8 per cent based on advance estimates released by the Department of Statistics Malaysia (DOSM) today.
This would be the highest quarterly growth recorded since Q4 2022 which stood at 7.4 per cent.
Bank Muamalat chief economist Dr Mohd Afzanizam Abdul Rashid said the 5.8 per cent was extremely beyond what the market had expected.
The highest estimation among the economists was around 5.0 per cent while Bank Muamalat expected it just at 4.5 per cent, he added.
"Clearly, the domestic economy along with improvement in external demand have been the key drivers for higher growth," Afzanizam told Business Times.
UOB said the sharp GDP spike in Q2 versus the 4.2 per cent growth in Q1 was partly aided by year-ago low base effects, with all five major economic sectors posting robust expansions during the quarter.
"The outturn beat our estimate (4.6 per cent) and Bloomberg consensus (4.7 per cent)," the bank said.
In its statement, DOSM chief statistician Datuk Seri Dr Mohd Uzir Mahidin said the estimated growth for this second quarter was in line with the increase seen in indicators such as the Industrial Production Index, wholesale and retail sales value and trade.
The increase in tourist arrivals as well as oil palm production and progress in mega projects also helped.
Mohd Uzir said growth in the quarter was driven by a 5.6 per cent expansion in the services sector, 4.7 per cent in the manufacturing sector and 17.2 per cent in the construction sector.
The agriculture sector rose 7.1 per cent in the quarter, contributed by remarkable growth in the oil palm sub-sector.
The mining and quarrying sector contracted 3.3 per cent due to a moderation in the natural gas sub-sector.
DOSM, which will release the preliminary GDP for Q2 on Aug 16, said 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 increase in household consumption expenditure was spurred by the festive and school holidays as well as the payment of Sumbangan Tunai Rahmah's Phase 2 in April.
Furthermore, a total of RM6.98 billion was withdrawn from Account 3 of the Employees Provident Fund as of June to support short-term financial needs.
Meanwhile, Afzanizam said the economy had essentially achieved the full employment status. This indicated that more people are employed and received steady income, leading to spending and concurrently contributing to the economy.
"We have seen sharp increase in construction growth at double-digit pace. That gives us the impression that investment activities are picking up its pace. Higher manufacturing growth suggests that the country is benefitting from the improvement in the external demand."
He said although the GDP might grow beyond 5.0 per cent this year, Afzanizam pointed out that the cautious sentiments among businesses and consumers would keep the growth within the 4.0-5.0 per cent range this year.
As for monetary policy, he said the current stance was appropriate and hence, the overnight policy rate (OPR) still at the current level of 3.0 per cent.
"Possible hike in OPR is something we cannot totally ruled out. But for now, it seems the 3.0 per cent is just about right for the economy.
"Above all, this data should be positive for ringgit as Bank Negara Malaysia is not about to easing its policies. Growth parameters looks good now," he said.