(Updated)

BNM: Malaysian economy grew 5% y-o-y in 1Q22 as domestic demand improved

Nor Shamsiah says the Malaysian economy is expected to improve further in 2022, during which annual GDP growth is projected at 5.3% to 6.3% as announced in March 2022. (Photo by Zahid Izzani Mohd Said/The Edge)

Nor Shamsiah says the Malaysian economy is expected to improve further in 2022, during which annual GDP growth is projected at 5.3% to 6.3% as announced in March 2022. (Photo by Zahid Izzani Mohd Said/The Edge)

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KUALA LUMPUR (May 13): Malaysia’s economy, as measured by gross domestic product (GDP), grew 5% year-on-year (y-o-y) in the first quarter of 2022 (1Q22), mainly supported by improving domestic demand as economic activity continued to normalise with the easing of Covid-19-driven containment measures, according to Bank Negara Malaysia (BNM) on Friday (May 13).

In a statement, the central bank said the country’s 1Q22 GDP growth also reflected the recovery of the nation’s job market, where the unemployment rate declined further to 4.1%, as well as continued policy support to safeguard economic growth.

"Household resilience continued to be supported by sound debt servicing capacity and healthy financial buffers at the aggregate level, with lending underpinned by prudent underwriting standards and loan affordability assessments by banks,” BNM elaborated.

"Strong external demand amid the continued upcycle of the global technology [sector] provided further lift to growth. On the supply side, the services and manufacturing sectors continued to drive economic growth, expanding by 6.5% and 6.6% respectively. 

"On a quarter-on-quarter seasonally-adjusted basis, the economy grew by 3.9%,” the central bank added.

Governor Tan Sri Nor Shamsiah Mohd Yunus said in the statement that the Malaysian economy is expected to improve further in 2022, during which annual GDP growth is projected at 5.3% to 6.3% as announced in March 2022. 

"This is underpinned by stronger domestic demand, continued expansion in external demand and further improvement in the labour market. 

"Growth will also benefit from the easing of restrictions, reopening of international borders and implementation of investment projects,” Nor Shamsiah explained.

Nevertheless, risks to Malaysia’s economic growth momentum remain, according to the central bank.

BNM said these risks include weaker-than-expected global economic growth, further escalation of geopolitical conflicts, worsening supply chain disruptions, adverse developments surrounding Covid-19 and heightened financial market volatility.

The central bank is mindful of Malaysia's inflation within an environment of high input costs and improving demand.

"For 2022, in an environment of high input costs and improving demand, headline inflation is projected to average between 2.2% and 3.2%. Underlying inflation, as measured by core inflation, is also expected to trend higher during the year, averaging between 2% and 3%,” BNM noted.

According to the central bank, several key factors are expected to partly contain upward pressure on prices, namely Malaysia's existing price control measures and continued spare capacity of the nation's economy. 

"Nonetheless, the inflation outlook remains subject to commodity price developments, arising mainly from the military conflict in Ukraine and prolonged supply-related disruptions. The outlook is also contingent on domestic policy measures on administered prices,” BNM explained.

Looking back, the central bank said Malaysia’s headline inflation as measured by the Consumer Price Index stood 2.2% in 1Q22, while core inflation was recorded at 1.7%.

"This (core inflation) reflects price adjustments amid higher costs and improving demand conditions with price increases being more noticeable, specifically for food items due to supply-related factors such as higher global commodity prices,” the central bank said.

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Chong Jin Hun