● The economy grew at a moderate pace in 4Q22 by 7.0% YoY (3Q22: 14.2%), moderately higher than house and market expectations (KIBB: 6.6%; consensus: 6.7%). Overall, 2022 growth settled at 8.7% (2021: 3.1%), a tad higher than the house and consensus forecast of 8.6%

- Growth moderation was largely due to the diminishing effect of lower base and policy measures. Nonetheless, growth was attributable to higher net exports and remained supported by domestic demand, specifically resilient private spending alongside sustained expansion in services and manufacturing sectors.

- Despite moderate growth, Malaysia remained one of the fastest-growing economies during the 4Q22 and among its ASEAN-5 (+VN) peers.

- Seasonally adjusted QoQ (-2.6%; 3Q22: 1.9%): fell to the lowest since 3Q21 due to a broad-based slowdown led by imports (-7.3%; 3Q22: 1.3%) and the services sector (-2.6%; 3Q22: 1.3%).

● Higher net exports partially mitigated the slowdown in domestic demand

- Net exports (23.4%; 3Q22: 18.7%): surged to a sixquarter high as value-added export growth fell lower than imports on a QoQ basis, contributing 1.6 percentage points (ppts) to the 4Q22 GDP growth (3Q22: 1.0 ppts).
▪ Exports (10.1%; 3Q22: 23.9%): Value-added exports moderated in line with the growth in gross merchandise exports (11.8%; 3Q22: 38.3%) but still recorded a double-digit growth for the third straight quarter. Growth remained supported by electrical and electronics (E&E) (17.3%; 3Q22: 41.4%) and continued strong demand from major trading partners, namely Singapore, China and the US, as well as benefitted from a weaker ringgit (USDMYR average 4Q22: 4.58; 3Q22: 4.48).
▪ Imports (11.5%; 3Q22: 24.4%): value-added growth slowed in line with the deceleration in gross merchandise imports (18.7%; 3Q22: 46.5%), partly reflecting slower domestic demand and inventory build-up. The weaker ringgit and tighter financial conditions amid rising interest rates partly contributed to the slowdown as well.

- Domestic demand (6.8%; 3Q22: 13.1%): moderated to a three-quarter low but remained supported by robust private spending
▪ Public spending (3.5%; 3Q22: 6.3%): moderated to the lowest since 2Q22 due to a sharp slowdown in public investment (6.0%; 3Q22: 13.1%) and public consumption (2.4%; 3Q22: 4.5%). Nonetheless, growth remained supported by continued government spending on emolument, supplies and services as well as capital expenditure by public corporations.
▪ Private spending (7.9%; 3Q22: 14.7%): sharp moderation due to a slowdown in private consumption (7.4%; 3Q22: 15.1%) and private investment (10.3%; 3Q22: 13.2%) amid waning policy support. However, growth in this component remained supported by improving labour market conditions and policy measures such as cash transfer and subsidies, as well as continued capital spending across all sectors.

● A broad-based sector slowdown, but remained anchored by services and manufacturing sectors

- Services (8.9%; 3Q22: 16.7%): growth slowed to a three-quarter low in line with a sharp slowdown in distributive trade sales (14.3% YoY; 3Q22: 32.3%). Nonetheless, growth remained supported by consumer-related subsectors backed by improved labour market conditions and sustained recovery in tourism activities. Services accounted for 5.1 ppts of overall GDP growth (3Q22: 9.5 ppts).

Source: Kenanga Research - 13 Feb 2023