GDP growth of 5.6% fails to impress business analysts
Economists and business groups fear growth may not be sustainable.
The GDP registered a 5.6% growth in the first quarter of 2023 but most stakeholders fear that the rate may not be sustainable.
PETALING JAYA: While Malaysia’s gross domestic product (GDP) registered growth in the first quarter of this year (Q1 2023), not all are overly optimistic.
For some economists as well as industry and corporate leaders who spoke to FMT Business after Bank Negara Malaysia (BNM) unveiled the figures today, the Malaysian economy is still not out of the woods yet.
Even for those who are happy with the 5.6% growth, such as the Small and Medium Enterprises Association (Samenta), the gloom on the horizon has yet to lift.
The rate, coming off an economically challenging year, was slightly above consensus. The 21 economists who were polled by Reuters from May 2 to May 9 came in with a lower rate of 4.8%.
However Geoffrey Williams, professor of economics at the Malaysia University of Science and Technology, pointed out that the economy actually contracted compared with the preceding quarter.
The GDP was RM380.9 billion in Q1 2023 compared with RM398 billion in Q4 2022. “This is a drop of 4.3%,” Williams pointed out.
On the other hand, he said, what was unveiled by the central bank were generally the positive headline figures after various adjustments and rebalancing of inventories had been accounted for.
He said that with the adjustments and rebalancing, the GDP actually grew only 0.9%. However, it was better nonetheless than the previous corresponding quarter when the GDP saw a 1.7% contraction.
Williams said the figures were also affected by a revision in the statistics.
Shaun Cheah, executive director of the Malaysian International Chamber of Commerce and Industry (MICCI), said there had been a significant slowdown in the economy of late, citing the “quite marked” decline in exports.
Exports recorded a 2.8% growth in this quarter, down from 22% in the same quarter in the previous year. In Q4 2022, exports grew 11.8%.
However Cheah conceded that the high increase in exports early last year could have been due to the release of pent up demand.
He also lamented the fact that the hoped-for surge in tourist arrivals from China has yet to materialise. China lifted its travel restrictions on Feb 18.
“The domestic market is still waiting for the Chinese tourist dollar,” he commented.
Cheah expects the growth to be sustainable, but brushed off any suggestion that robust growth could be seen anytime soon.
Samenta chairman William Ng said the 5.6% growth rate was in line with the sentiment on the ground.
“Many SMEs have reported a recovery in 2022 and early 2023, particularly those in retail, food and beverages and manufacturing,” he said.
However, he said, SMEs would continue to be vigilant against the potential of a downturn in the coming months given the rising tension globally and slowing growth in orders and demand.
For the Federation of Malaysian Manufacturers (FMM), the growth has hardly been discernible.
FMM president Soh Thian Lai said business conditions remain challenging as external demand has weakened while the cost of imported inputs stays elevated.
He said the weak ringgit was also a challenge.
Firdausi Suffian, senior lecturer and economist at Universiti Teknologi Mara, said the country should brace itself for a deceleration in economic growth.
He attributed the less-than-rosy picture to a tightening of the monetary policy, not just in Malaysia but in several other economies as well. “As a result, less investment is likely to come into the country,” he said.
BNM recently raised the overnight policy rate (OPR) by 25 basis points to 3%.
Shankaran Nambiar, senior research fellow at the Malaysian Institute of Economic Research (MIER), is equally pessimistic.
“I’m not sure if the good numbers seen for this quarter can be sustained over the year,” he said.
“The external environment may not be supportive and the question of geopolitical risks remain,” he added.
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