KUALA LUMPUR: Malaysia’s economy expanded by 2.9 percent in the second quarter of 2023 (2Q 2023), supported by improving labor market and the continued increase in domestic demand and tourism activities, according to the Department of Statistics Malaysia.

Chief statistician Datuk Seri Mohd Uzir Mahidin said Malaysia’s economic growth moderated during the quarter, partly due to weaker external demand amidst the global technology cycle, lower commodity production and high base effect from 2Q 2022, which recorded gross domestic product (GDP) growth of 8.9 percent.

Malaysia posted a GDP growth of 5.6 percent in 1Q 2023, bringing the average growth for the first half of the year (1H 2023) to 4.25 percent.

On a quarter-on-quarter seasonally-adjusted basis, the economy grew by 1.5 percent (1Q 2023: 0.9 percent).

Bank Negara Malaysia (BNM) Governor Datuk Abdul Rasheed Ghaffour said Malaysia’s economy remains on track to achieve a growth of between 4.0 percent to 5.0 percent this year, backed by the labor market’s continued recovery, implementation of projects and rising tourism activities.

He added that the Madani Economy Framework would drive the comprehensive restructuring of the Malaysian economy.

Inflation

Speaking at a press conference here today, Abdul Rasheed said the headline inflation is expected to be between 2.8 percent and 3.8 percent in 2023, due to the moderation in core inflation and gradual subsidy rationalization.

“Core inflation, while declining, remained elevated relative to its long-term average (2011-2019 average: 2.0 percent),” he said.

He noted that both non-core inflation and core inflation had moderated, where fresh food and fuel contributed to the decline in non-core inflation, while the moderation in core inflation (2Q 2023: 3.4 percent; 1Q 2023: 3.9 percent) was largely contributed by selected services.

These include food away from home, telephone and telefax services, and personal transport repair and maintenance.

“Inflation pervasiveness declined as the share of Consumer Price Index (CPI) items recording monthly price increases moderated to 42.7 percent during the quarter (1Q 2023: 56.0 percent), below the second quarter long-term average (2011-2019) of 43.9 percent.

“Notably, inflation pervasiveness dropped in June after a transitory uptick in May following the festive season,” Abdul Rasheed said.

As for 2H 2023, both headline and core inflation are projected to trend lower within expectations, partly due to the higher base in 2H 2022.

Nonetheless, he noted that risks to the inflation outlook are subject to the changes to domestic policy on subsidies and price controls, as well as global commodity prices and financial market developments.

Outlook

Moving forward, the BNM governor said the economic growth will continue to be supported by domestic demand amid improving employment and income as well as the implementation of multi-year projects.

Tourist arrivals are expected to continue rising, which would support tourism-related activities.

“Risks to Malaysia’s growth outlook are subject to downside risk stemming primarily from weaker-than-expected global growth.

“There are, however, upside risk factors such as stronger-than-expected tourism activity and faster implementation of projects,” he added.