(Bloomberg) -- Malaysia’s economic growth in the second quarter surpassed all estimates on broad-based gains from manufacturing to consumption, suggesting a recovery seen at the beginning of this year is gathering speed.
Gross domestic product grew 5.8% in the April-June quarter from a year ago, according to advance estimates released by the Department of Statistics on Friday. That was the fastest since the December quarter of 2022 and quicker than even the highest forecast of 5.1% in a Bloomberg survey.
The performance follows a 4.2% expansion seen in the first three months of 2024, and puts the economy on course to hit, if not surpass, the government’s projection of a 4%-5% growth this year.
“Malaysia’s economy is expected to continue its growth momentum, supported by domestic and export-driven factors, with a positive outlook for the remainder of the year,” according to the statement. The final data is scheduled for release on Aug. 16.
The robust growth data, along with potential price pressures arising from reduction in fuel subsidies support the central bank’s decision to keep borrowing costs elevated. Bank Negara Malaysia last week pointed to sustained strength in the economy, aided by resilient consumption and improved exports due to the global tech upcycle, in announcing its decision to keep the policy rate unchanged at 3%.
The figures were “extremely beyond” market expectations, and allows for the possibility that GDP may exceed 5% this year, said Mohd Afzanizam Abdul Rashid, an analyst at Bank Muamalat Malaysia Bhd. “Above all, this data should be positive for the ringgit as BNM is not about to reverse its course. Growth parameters look good now,” he added.
The local currency was down 0.2% against the dollar at 2:36 p.m. local time. The country’s stock benchmark held gains, even as a broad selloff prevailed in Asia.
Malaysia is poised to benefit “from a trifecta of positives” this year — improving private investment, recovery in external demand, and resilient consumer spending, according to Maybank Investment Bank analysts Suhaimi Ilias and Wong Chew Hann in a note this week ahead of the data. They expect growth to come in at 4.7% this year.
It’s a positive turnaround for the $400 billion economy, which saw growth moderate last year amid tepid global demand. The International Monetary Fund expects economic output to improve this year to 4.4% from 3.7% in 2023.
The country recently drew billions of dollars of investment pledges from the likes of Google and Microsoft Corp. as Prime Minister Anwar Ibrahim positions Malaysia as a regional tech hub. At the same time, exports grew for a third straight month in June and will likely improve further. Cash handouts and higher wages for civil servants will also support domestic consumption.
Still, an uneven or slower recovery in China — Malaysia’s largest trading partner — could cloud the outlook for the Southeast Asian nation, which also relies on Chinese tourists and investment to support economic activity.
--With assistance from Shinjini Datta, Joy Lee and Catherine Bosley.
(Updates with more comments from fourth paragraph.)
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