KUALA LUMPUR, Aug. 15 (Xinhua) -- Economic research firms on Monday raised Malaysia's full year growth forecast after the country achieved "better than expected" growth in the second quarter.
Fitch Solutions Country Risk and Industry Research said in a note that it has revised Malaysia's real gross domestic product (GDP) growth forecast to 5.9 percent in 2022, up from 5.2 percent previously, given that Malaysia's growth performance came in above its expectations in the first half.
"Our forecast now lies between the central bank growth target of 5.3 percent to 6.3 percent. In the second half, we expect Malaysia's economic growth to slow down as pent-up demand eases," it said, adding that the softening global economic outlook and tighter monetary conditions will also weigh on exports and investment.
Malaysia announced last Friday that the country expanded strongly by 8.9 percent year on year in the second quarter, accelerating from the growth rate of 5 percent year on year registered in the first quarter.
The growth, which was the most substantial GDP growth rate since the second quarter of 2021, brought cumulative growth to 6.9 percent year on year in the first half of 2022.
Following Malaysia's strong second quarter GDP outturn, KAF Research SDN BHD also raised its full-year GDP growth forecast to 6.5 percent for 2022, from 5.5 percent previously, as growth is likely to pick-up momentum in the third quarter before normalizing towards the end of the year.
According to KAF Research SDN BHD, Malaysia's economic recovery is likely to continue into the third quarter.
"Looking ahead, we anticipate Malaysia's economic growth to gain further momentum in the third quarter, aided by ongoing pent-up demand, recovering labor markets and the low base effect of the Delta-wave lockdown in the third quarter of 2021," it said.
However, it anticipated the economic growth to normalize as these favorable base effects and fiscal responses to COVID-19 fade.
Rising inflationary pressure, especially on food prices, is also expected to lead to a cooldown in consumer spending, it added.
Thus, it projected Malaysia's economic growth to slow in 2023 amid waning pent-up demand, less expansionary fiscal spending and tighter financial conditions, which will result in a slowdown of consumer spending.
Malaysian research house CGS CIMB, meanwhile, raised Malaysia's 2022 GDP growth to 7.3 percent year on year due to the strong second quarter GDP growth, the low base effect, as well as the current economic trajectory.
"Malaysia's second quarter GDP grew 8.9 percent year on year and 3.5 percent quarter on quarter, beating our and market's expectations, amid base effects and reopening drive," it said.
It also expects the strength in the second quarter growth to persist into the third quarter.
"Low base effects will continue to play a role, propping up some of the indicators upwards on a year-on-year basis. Looking at the trend, we might even see third quarter year-on-year growth reaching higher than the second quarter," it said.
However, it said the impetus from the reopening is likely to contribute less to growth going forward.
Hong Leong Investment Bank Research also upgraded Malaysia's GDP forecast to 6.5 percent year on year from 5.9 percent previously, slightly higher than Malaysian Central Bank's forecast range of 5.3 percent to 6.3 percent.
"While we still expect a slowdown in the fourth quarter, we do not think it will be as sharp given the underlying strength in the economy thus far," it said.
According to the research house, Malaysia's unemployment rate has continued to trend downwards, private sector wage growth has improved and manufacturing sales are expected to remain strong, albeit at a more moderate trend.
AmBank Research also revised upwards Malaysia's economic projection this year. Its base case GDP growth target for Malaysia in 2022 is now 6.4 percent from the previous 5.6 percent.
"Following the strong first half performance, we now expect the second half GDP to also perform well. Part of the second half GDP performance would be supported by the low base of -0.4 percent in the second half of 2021," it said.
Besides the low base, it foresees the Malaysian economy to continue benefiting from strong export earnings backed by firm commodity prices, a still healthy global semiconductor environment, resource-based exports, and foreign direct investment inflows.
"Also, domestic activities, primarily private expenditure, will continue to lend support to the overall economic performance," it added. ■
