Third Quarter 2022 GDP Grew By 14.2 Percent: Stronger Economic Performance Amid Global Challenges

Malaysia’s economy continues to build on the momentum of economic recovery, delivering even faster growth of 14.2% in the third quarter of 2022 (Q3 2022) compared to 8.9% in the second quarter and 5% in the first quarter. The strong GDP growth was contributed by robust domestic and external demand as well as improved labour market. This is also driven by encouraging performance in all economic sectors primarily the services and manufacturing sectors. In addition, this growth is supported by the implementation of Budget 2022 measures as well as the spill over effect from the transition to the endemic phase which resulted in more vigorous economic and social activities. Overall, the GDP expanded by 9.3% during the first nine months of 2022.

Among the various economic indicators that have shown signs of improvement are:

1. The labour market maintained its full employment level with the unemployment rate continued to decline to 3.7% in Q3 2022 (Q2 2022: 3.9%). This downward trend is expected to continue until the end of 2022 in line with the implementation and continuation of various employment stabilisation programmes as well as better business prospects.
   
   
2. Domestic demand continued to be driven by positive private consumption and business prospects. The MIER’s Consumer Sentiment Index (CSI) rose to 98.4 points in Q3 2022 (Q2 2022: 86.0 points), while the DOSM’s Business Tendency Statistics showed 4.7% confidence indicator (Q2 2022: 3.5%). Overall, this was reflected in strong manufacturing sales, which increased by 19.5% to RM161.7 billion in September 2022, as well as wholesale and retail trade sales, which increased 23.9% to RM134.0 billion. Tourist arrivals also recorded an increase to 3.2 million from January to July 2022 compared to the same period last year (January - July 2021: 0.06 million).
   
   
3. External trade continued to register double-digit growth with favourable foreign direct investment (FDI) performance. Total trade surged 42% to RM775 billion, while net FDI recorded RM12.3 billion in Q3 2022 (Q2 2022: RM17.3 billion). Manufacturing sector, financial and insurance/takaful as well as real estate activities attracted the most FDI, primarily from the US, Japan, the Netherlands and Singapore.

For Malaysia’s banking sector and capital market,

1. Banks’ intermediation activities remained healthy as strong economic activities persisted. Outstanding household loans grew by 6.2% on account of high growth in loan disbursements to households for the purchase of houses and cars. This reflected continued loan demand amid the lapse of some measures such as the sales tax relief on new vehicles. Meanwhile, outstanding business loan growth stood at 5% as the growth in loan repayments outpaced that of loan disbursements, particularly in the non-SME segment. Loan applications remained forthcoming across most loan purposes and business segments, reflecting continued demand for financing to support business activity.
   
   
2. Local equity investment activities continue to remain steady during Q3 2022, with net purchases from local retail contributing RM577.9 million. In addition, during the same quarter, the local market continues to record encouraging fundraising activity by raising RM737.2 million through Initial Public Offerings (IPOs) amid various uncertainties such as rising inflation, interest rate hikes, concerns pertaining to global economic slow-down, geopolitical issues and supply chain disruptions. Overall, the local equity market recorded net foreign funds inflow worth RM6.6 billion from January to September 2022, with the bulk of the shares originating from foreign institutional investors.
   
   

MOVING FORWARD

The exceptional economic achievement during the third quarter of 2022 implies that Malaysia's GDP is on track to surpass pre-pandemic growth in 2022. This projection is supported by an expansion in domestic demand mainly from household spending in line with the recovery of the labour market and income prospects. In addition, the contribution of the tourism-related sector to domestic demand is expected to recover following an increase in the number of tourist arrivals. The acceleration of infrastructure projects with high multiplier effects, robust growth in private investment as well as strong external demand especially from major trading partners will further strengthen the economy.

As a highly open economy, Malaysia’s economic prospect is dependent on global economic developments. Economic pressures, most notably an increase in global inflation due to continued price increases in commodity, food and raw materials, besides prevailing supply chain issues partly due to the tension between Russia and Ukraine, may raise the operating and input costs to businesses. Furthermore, the risk of tighter global financial conditions and rising cost of living may pose as challenges to the recovery efforts. Malaysia's economy has started to experience the effects of global slowdown, particularly from the advanced countries. Nonetheless, Malaysia’s near-term growth outlook remains resilient with sound macroeconomic fundamentals, stable financial conditions as well as a broad-based and diversified economic structure. Various measures will be continued to uplift the country’s economic potential for Malaysia to remain as an attractive investment destination as well as promote more sustainable and inclusive economic growth for all.

Ministry of Finance Malaysia
Putrajaya
11 November 2022