KUALA LUMPUR: Malaysia will likely post a decent economic growth in the first quarter (Q1) but the performance may moderate sharply in the second quarter to June.

Despite a waning low base effect and as the economy returns to normalcy, economists believe the domestic economy will remain resilient.

Research team at Kenanga Research, led by chief economist Wan Suhaimie Wan Mohd Saidie, projected the gross domestic product (GDP) to grow 5.1 per cent before slowing to 3.5 per cent in Q2.

This would be the lowest since Q1 of 2022, as the lower base effect dissipated and the economy returned to normalcy with the absence of stimulus measures, Wan Suhaimie said.

This also considers the impact of the global economic slowdown amid further tightening in global monetary policy to combat rising inflationary pressure.

"As a result, global commodity prices eased in early 2023, while Malaysia's export performance registered a second month-on-month growth contraction of 0.3 per cent in February (January: -14.5 per cent) despite the optimism arising from China's economic reopening," he added.

Putra Business School associate professor Dr Ahmed Razman Abdul Latiff said the Q1 growth would remain positive but not as high as the 7.0 per cent expansion in the last quarter of 2022.

"It will remain positive but probably around 4.0-5.9 per cent, mirroring the current expectation of the government and analysts that the annual GDP for Malaysia this year will be around 4.0 per cent.

"As for Q2, the growth will still be there but will be lower than Q1 2023 due to the trends that we are experiencing now in term of slower demand for our exports and decreasing trend of oil prices," Ahmed Razman told NST Business.

He noted that the Q4 2022 high growth was supported by the continuous demand for the country's exports in the past many months, which had shown continuous incremental trend throughout the year.

Although the trend is expected to continue this year, the rate of increment will be lower.

Bank Muamalat Malaysia Bhd head of economics and market analysis Mohd Afzanizam Abdul Rashid expects a bumpy ride for the global economy this year.

"Given the recent event in the US i.e the banking crisis, all eyes will be on the next FOMC in May and June. The market would want to see whether the Federal Reserve could actually backtrack their hawkish stance given the recent incidence in respect to their banking sector.

"By extension, the monetary policy stance by the ECB (European Central Bank) and BOE (Bank of England) as well as BOJ (Bank of Japan) will closely scrutinised whether if there is any wind of change in their stand."

Still, Afzanizam feels Malaysia's GDP growth for Q1 would be decent.

"We have seen total exports growing at a robust rate in February and we have seen total car sales rising a fast clip during February too. Bank Negara Malaysia left the key interest rate unchanged for now. So that could sentiment to some degree and by extension, consumer spending," he said.

https://www.nst.com.my/business/2023/03/893970/decent-gdp-growth-expected-q1