Domestic Demand Anchored Second Quarter Economic Performance Amidst Global Uncertainty

Domestic demand bulwarked the Malaysian economy in the second quarter of 2023 (Q2 2023), against the backdrop of a cooling global trade. The Q2 2023’s gross domestic product (GDP) expanded by 2.9%, bringing the first half (H1) of 2023’s growth to 4.2%. This is in line with the Government’s growth forecast of 4.0% – 5.0% for 2023.

Domestic demand remained resilient in the second quarter registering a 4.5% increase while Malaysia’s total trade contracted by 11.3% to RM643.4 billion in Q2 2023. Public and private expenditures were also instrumental in anchoring the Malaysian economy in Q2 2023, as they grew by 4.6% and 4.5% respectively. On the supply side, Malaysia’s economic expansion in Q2 2023 was underpinned by growth in construction, services, and manufacturing sectors. The construction sector recorded the strongest performance, soaring 6.2% in the quarter, followed by services (4.7%), and manufacturing (0.1%).

“Despite global economic challenges, Malaysia’s economy remains resilient and continues to improve. Inflation fell from 2.8% in May to 2.4% in June 2023. Unemployment achieved a new post-pandemic low of 3.4% in June 2023 down from 3.5% in May,” said YAB Dato’ Seri Anwar Ibrahim, Prime Minister and Finance Minister.

Malaysia’s domestic inflation in June 2023 was tamer than selected advanced and regional countries such as the UK (7.9%), the Philippines (5.4%), Singapore (4.5%), Indonesia (3.5%) and the US (3%).

The Government maintains its economic growth forecast for 2023

External demand for the second half (H2) of 2023 will continue to be affected by global vulnerabilities namely geopolitical tensions, the continuing supply chain disruption, tight monetary policy to address global inflation, and the growth prospects of major economies, many of which are Malaysia’s leading trading partners.

“Nevertheless, the Government remains confident to meet its GDP forecast of 4.0% – 5.0% for 2023. Malaysia’s domestic economy remains vibrant with many indicators showing healthy trends. To support the momentum of domestic growth, the Government maintains its responsive fiscal policy and will continue to focus on expediting the realisation of approved investments and accelerate implementation of Government projects,” YAB Dato’ Seri Anwar said.

In line with the MADANI Economy framework, upcoming policy documents namely the New Industrial Master Plan 2030, the 12th Malaysia Plan Mid-term review and the 2024 Budget will further set out strategies and measures to restructure Malaysia’s economy and deliver inclusive development for the rakyat. Focus areas include improving ease of doing business, promoting quality investments to generate higher-income jobs, ensuring good governance, and investing in better public services and infrastructure towards improving the quality of life for the rakyat.

Ministry of Finance Malaysia
Putrajaya
18 August 2023