Malaysia’s economy may slow in fourth quarter: finance ministers

The fourth quarter will be “the challenge” for Malaysia’s economy if global headwinds such as Russia’s war on Ukraine and China’s zero-Covid policy continue, Finance Minister Zafrul Aziz said.

China is Malaysia’s largest trading partner, and disruptions to supply chains and trade will dampen “some of the growth expectations for Malaysia in the fourth quarter of this year,” he said.

Maybank Investment Banking Group shared a similar view.

The bank expects rising inflation and interest rates domestically and around the world, along with signs of slowing in major economies such as the United States, Europe and China, to have a “visible impact” on the country’s economy beginning in the fourth quarter. said Suhaimi Ilias, group chief economist at Maybank IBG.

Growth momentum for July-September should be strong, but that could be the result of a negative base effect from the same period last year, Zafrul said.

Malaysia’s gross domestic product shrank 4.5% in the third quarter of 2021, driven by a slowdown in all major economic sectors, mainly manufacturing and service industries, the Department of Statistics Malaysia reported.

Suhaimi said Maybank IBG expects another quarter of mid- to high-single-digit growth of around 7.5% in the third quarter, partly due to the low base a year earlier when the economy shrank.

Despite the challenges ahead, Zafrul said he is confident Malaysia’s full-year economic growth will meet government forecasts.

“I’m still very optimistic that we’ll get the projected GDP number between 5.3% and 6.3%…probably at the high end of that 6.3%,” he told CNBC’s Squawk Box Asia on Monday.

On Friday, Malaysia’s central bank said the country’s economy grew 8.9% year-on-year in April-June.

This was fueled by stronger domestic consumption and tourism spending after Malaysia fully reopened its international borders in April, Zafrul said.

“Domestic consumption has become strong, much stronger than we expected,” he said.

Retail spending for the month of June rose 44% year-on-year as government fiscal stimulus packages and pent-up demand from the pandemic boosted consumer spending, Zafrul said. Malaysia’s economy may slow in fourth quarter: finance ministers

Joshua Buckhalter

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