Data Highlights

• Based on the latest advanced estimates from the Department of Statistics (DOSM), Malaysia's real GDP posted a robust growth of 5.8% YoY to RM400.3bn in the second quarter of 2024. On a quarterly basis, the economy rose by 0.7% non-seasonally adjusted. The estimates came in above consensus forecast of 4.7% YoY and our in-house estimate of 5.5% YoY.

• The pace of growth was also the fastest since 4Q22. For the first half of the year (1H24), GDP increased by 5.0% YoY, compared to a 4.1% YoY growth in 1H23.

• To note, the advanced estimate exclusively covers the five primary economic sectors of the supply side. This estimate was compiled using partial information and approximations based surveys conducted by the DOSM and administrative data obtained from related agencies.

• The breakdown reveals that the majority of sectors experienced improved growth, contributing to the overall economic upturn. Specifically, construction sector (constituting 4.0% of GDP in 2Q24A) led the growth with double digit figure. Additionally, accelerated gains were observed in most of the sectors except mining segment (6.0% of GDP). The services (59.2% of GDP), manufacturing (23.3% of GDP), agriculture (6.3% of GDP), and import duties (1.2% of GDP) recorded a faster increase during the period.

• The preliminary 2Q24 GDP estimate released by DOSM was within the same growth trajectory as ours, but the forecast for sectors varied. Figure 3 below illustrates our anticipation for a notably stronger performance in the services sector during the second quarter. Our anticipation is based on the resilient performance in the labour market, manageable inflation rate and a sustained growth in personal spending. According to the latest data, Malaysia's unemployment rate held steady at the pre-pandemic level of 3.3% in May 2024. Concurrently, the distributive trade for both value and volume in Malaysia has gained momentum, experiencing a growth of 7.1% and 5.7% YoY, respectively in the same month. The agriculture sector has also fallen below our initial expectations. Despite anticipating a growth rate of 5.9% YoY in 2Q24, the production data for Crude Palm Oil (CPO) has fallen short of our projections. Additionally, our assumption that the manufacturing and construction sectors would experience more moderate growth contrasts with DOSM estimates.

• Observing the historical trend of DOSM's initial publications on Advanced GDP Estimates, it suggests a likelihood that the actual GDP next month may align closely with this level. However, there remains a possibility for some variation in the final figure upon the official release of 2Q24 GDP. For instance, during the Advance GDP Estimate for 1Q24, the forecast was 3.9% YoY, but the actual figure was 4.2% YoY. Similarly, in 4Q23, the estimate was 3.4% YoY, while the actual figure was 2.9% YoY, and in 3Q23, the estimate was 3.3% YoY but the actual figure was 3.1% YoY. This pattern of slight deviations between initial estimates and final figures highlight the dynamic nature of economic forecasting and underscores the importance of considering a range of factors that may influence the final GDP outcomes. The actual GDP for 2Q24 is scheduled to be released on 16 August 16 2024.

• We made no adjustment to our 2024 GDP forecast of 4.7% YoY. Any adjustments will be considered once we receive the actual data for the second quarter, while also monitoring other relevant factors that might affect the growth trajectory, such as the slowdown in China.

• As of now, aside from the trade performance and CPO production, crucial indicators for June/2Q24 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 presents a hopeful outlook for Malaysia to potentially achieve our GDP estimate.

Source: TA Research - 22 Jul 2024