Despite a sharp slowdown, Malaysia's economy posted robust expansion in the fourth quarter of 2022, supported by private consumption and investment, taking overall growth for the year to the highest in 22 years.
Growth in gross domestic product, or GDP, advanced 7.0 percent in the fourth quarter, but the pace more than halved from the 14.2 percent registered in the third quarter, data from the Bank Negara Malaysia showed Friday.
On a quarter-on-quarter basis, the economy posted a contraction of 2.6 percent, in contrast to the 1.9 percent expansion in the third quarter.
However, economic growth surpassed the pre-pandemic level by 7.2 percent.
In the whole year of 2022, the economy expanded 8.7 percent, well above 3.1 percent posted in 2021. This was the biggest growth in 22 years.
Driven by the improvement in the labor market, private consumption contributed 58.2 percent to GDP in the fourth quarter.
Private consumption rose 7.4 percent annually, but the pace was slower than the 15.1 percent rise a quarter ago. In addition, gross fixed capital formation climbed 8.8 percent.
Both exports and imports grew at a moderate pace of 9.6 percent and 8.1 percent respectively, due to slower growth in goods and services. Meanwhile, growth in the government spending moderated to 2.4 percent.
The central bank forecast the economy to expand at a more moderate pace amid a challenging external environment.
Domestic demand is expected to drive growth on the back of the continued recovery in the labor market. Both services and manufacturing sectors are also forecast to support economic growth.
The BNM said the slowdown in exports following weaker global demand would be partially cushioned by higher tourism activity.
On price front, the bank said headline and core inflation are expected to moderate, but remain elevated in 2023 amid the lingering cost and demand pressures.
Capital Economics' economist Shivaan Tandon expects the Malaysian economy to struggle over the coming quarters. Admittedly, the reopening of the international border will provide a boost to growth, the economist said.
Although the central bank signaled that further rate hikes are unlikely, rate hikes will remain elevated for the foreseeable future, Tandon added.
Separate data showed that the current account surplus surged to MYR 25.7 billion in the fourth quarter from MYR 14.1 billion in the preceding period. The improvement was driven by net exports of goods and lower deficit in primary income.