Data Highlights

• Based on the latest advanced estimates from the Department of Statistics (DOSM), Malaysia's Gross Domestic Product (GDP) increased 3.4% YoY to RM411.35bn in the final quarter of 2023. Though the growth rate is slightly better than the 3.3% YoY in 3Q23, it is lower than the 4.1% median estimate in a Bloomberg survey. To note, the advanced estimate exclusively covers the five primary economic sectors of the supply side. 

• Breakdown showed the manufacturing (23.3% of GDP in 4Q23E) and mining (6.4% of GDP) sectors rebounded in the final quarter, contributing to the overall economic upturn. The agriculture (6.2% of GDP) sector also recorded a better growth during the quarter while both the construction (3.5% of GDP) and services (59.4% of GDP) registered a moderate expansion.

• DOSM has reported that the performance of 2023 was marked by a moderation, attributed to a decline in exports of goods and a sluggish manufacturing sector. As a result, Malaysia's economy experienced a deceleration, registering a 3.8% growth for the year, a notable drop from the robust 8.7% growth observed in 2022. The is below our projection and the government's forecast of 4.0%. The Services sector registered a growth of 5.4% in 2023, followed by the Construction (5.8%) and Manufacturing (0.8%) sectors. Additionally, the Mining & quarrying sector grew at 1.0% and Agriculture sector grew marginally for two consecutive years by 0.5%. 

• The preliminary 4Q23 GDP estimate released by DOSM lagged behind our optimistic forecast of a 4.6% YoY growth. Figure 3 below illustrates our anticipation for a notably stronger performance in the services sector during the final quarter. This is attributed to the robust performance in the labour market and a sustained growth in personal spending. According to the latest data, Malaysia's unemployment rate has reverted to the pre-pandemic level of 3.3% in November 2023. Concurrently, the distributive trade in Malaysia has gained momentum, experiencing a 4.7% YoY increase in the same month. 

• Some sectors have fallen below our initial expectations, notably the Agriculture sector. Despite anticipating a growth rate of 2.2%, the December data for Crude Palm Oil (CPO) has fallen short of our projections, suggesting it may not meet our expectations. Additionally, our earlier assumption that the mining sector would experience moderate growth, with the manufacturing sector's momentum helping to offset this moderation, contrasts with DOSM estimates. The period from October to November last year (quarter to date) witnessed an average YoY rise of 4.6% in IPI mining and 0.4% in IPI manufacturing.

• Observing the historical trend of DOSM's initial publications on Advance Estimate of GDP, it suggests a likelihood that the actual GDP later next month may align more closely with this lower level. Nevertheless, there is a possibility for positive contribution from the upcoming December data to enhance the final quarter reading. As of now, aside from trade performance and CPO production, crucial indicators like Distributive Trade Index, Industrial Production Index, Construction Statistics and the Index of Services are yet to be published. The economic trajectory of these indicators might provide a hopeful outlook for Malaysia to achieve a more favourable figure in the final quarter. Any necessary adjustments to our data, particularly the 2024 GDP forecast, will be made during the release of the actual GDP, scheduled for 16 February 2024.

Source: TA Research - 22 Jan 2024