From stronger trade performance to domestic spending, Malaysia has sufficient reason to remain confident in its economy, which is set to grow 6% this year, MIDF Amanah Investment Bank said.
In a research note on Monday (Aug 1), the investment bank said it is maintaining Malaysia’s gross domestic product (GDP) growth projection at 6% this year, near double the 3.1% expansion recorded last year.
It said the encouraging growth momentum in the domestic economy is believed to continue into the second half of 2022 (2H2022).
MIDF Amanah Investment Bank said the leading index (LI) signalled growth momentum to continue, rebounding to positive growth in May at 2.2% year-on-year (y-o-y), after three months of contraction, supported by higher real imports of other basic previous and other non-ferrous metals, as businesses bought more intermediate goods in anticipation for better business and demand outlook.
It said the current economic activities also picked up further, as the coincident index (CI) rose faster at 6.4% y-o-y, the highest expansion in 12 months and mainly underpinned by the stronger retail trade activity.
The investment bank said the nation also recorded another stronger-than-expected external trade performance in June, with exports growth quickened again to 38.6% y-o-y, underpinned by stronger growth in domestic exports of 30.5% y-o-y, on the back of increased external demand for electrical and electronic (E&E), petroleum, palm oil and liquefied natural gas (LNG).
“Moreover, domestic spending will continue to grow, boosted by continued recovery in the job market, increased people’s mobility and increased tourist arrivals following the reopening of international borders,” it said.
It said the latest data showed domestic spending activity grew faster, benefiting from the reopening of the economy and the international borders, despite rising inflation. Overall, it said price pressure in Malaysia remained stable, thanks to the capped retail fuel prices.
“Looking ahead, we expect private consumption and services sector to contribute to the stronger second quarter (Q2) and 2H2022 growth, amid robust and sound domestic demand,” it said.
It said for Q2, the three-month moving average of the growth for distributive trade sales was stronger at 15% y-o-y.
“Nevertheless, we opine downside risks to growth outlook will come mainly from external factors such as sluggish growth in China, the ongoing war in Ukraine, changes in global commodity prices and volatility in the international financial markets,” it added.