THE strength of Malaysia’s 2Q 2022 economic growth is likely to persist into 3Q 2022 with low base effects continuing to play a role by propping up some of economic indicators upwards on a year-on-year (yoy) basis.

Looking at the trend, CGS-CIMB Research expects 3Q 2022 yoy growth to even exceed that of 8.9% posted in 2Q 2022 although the impetus from border re-opening is likely to contribute lesser to growth going forward.

“Looking into mom (month-on-month) seasonally adjusted retail sales, growth contracted for two consecutive months (May and June 2022) as pent-up demand dissipates,” opined chief economist Nazmi Idrus in an economic update.

“On the external side, export performance is still robust although downside risks from the end of the E&E (electric and electronic) sector upcycle and competition with Indonesia’s palm oil might put a cap on shipment.”

Nevertheless, CGS-CIMB Research expects further support ahead with the gradual return of foreign workers to alleviate existing supply pressure as well as rising tourist arrivals to support tourism-related industries while global commodity prices have abated with inflation likely peaking in 3Q 2022F.

“In addition, the further decline in unemployment, strong wage growth and increase in minimum wages should also prop up consumer spending,” projected the research house.

“We see upside risks to our 2022 GDP forecast of 6.2% yoy. As such, we revise upwards our GDP to 7.3% for 2022F, taking into consideration the strong 2Q22 GDP, the low base effect, as well as the current economic trajectory.”

However, CGS-CIMB Research maintained its growth forecast for 2023F at 5.0%. “On monetary policy, the OPR (overnight policy rate) outlook remains unchanged with one 25 basis points (bps) hike in September thus pushing the end-year rate to 2.50%,” added the research house.

Supported by the rebound in the Leading Index of 2.2% yoy in May and lower base impact (GDP declined by 4.5% yoy in 3Q 2021), TA Securities Research expects strong GDP growth to be sustained in 3Q 2022 before normalising in the final quarter of this year.

“For now, we do not intend to change our 2H 2022 GDP forecast of 5.7% yoy,” justified TA Securities Research.

“With 1H 2022 GDP now at 6.9% yoy, our full year 2022 GDP forecast will now be 6.3% yoy (previous: 6.6% yoy). The new projection will be at the upper range of Bank Negara Malaysia’s (BNM) forecast of 5.3%-6.3% yoy.” – Aug 15, 2022