Malaysia Growth Momentum Seen Continuing

Given the sustained macroeconomic growth and rising underlying price pressures, we maintain our projection that BNM will continue to adjust OPR higher to a more normal level at the monetary policy meeting next week.

Malaysia Growth Momentum Seen Continuing
Photo by Fredrick Filix / Unsplash

Malaysia’s Leading Index (LI) rose by +4%yoy in Aug-22 (Jul-22: +4.1%yoy), signaling positive growth outlook in the near term.

The sustained rise in LI was contributed by higher real imports of semiconductors, increased number of housing units approved,  growth in real money supply (M1). Relative to Jul-22, LI rose by +1.6%mom, indicating a more positive developments in Aug-22 compared to previous month, says MIDF.

Meanwhile, the Coincident Index (CI) also saw sustained increase albeit at relatively slower pace of +9.8%yoy (Jul-22: +12.5%yoy). While the moderate growth was due to the higher base in Aug-21, continued growth in CI reflects mainly driven higher industrial production activities and better real salaries and wages in the manufacturing sector.

In other words, activities in Aug-22 expanded due to growing business activities and better income growth for the employees.

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On month-on-month basis, CI rebounded by +0.8%mom after falling by -1.6%mom in Jul-22. For this year, we forecast Malaysia’s economic growth will be better than last year driven by increasing domestic demand and robust external trade.

Given the sustained macroeconomic growth and rising underlying price pressures, we maintain our projection that BNM will continue to adjust OPR higher to a more normal level at the monetary policy meeting next week.

Nevertheless, several risks could affect Malaysia’s growth outlook such as potential global slowdown, prolonged supply-side challenges, high inflation and rising borrowing costs.