External trade the main driver of GDP growth in Malaysia
Malaysia’s economy is set to normalize in the first quarter of 2023, with external trade being the main growth driver for gross domestic product (GDP).
According to Malaysia University of Science and Technology economics professor Geoffrey Williams and HELP University economist Paolo Casadio, the Malaysian economy is expected to grow 2.6% year-on-year but contract 0.1% on a quarterly basis.
“If that is the case, the Malaysian economy is technically in recession, having recorded two consecutive quarters of contraction. We attribute a bit more than 50% probability to this outcome and the remaining almost 50% of a slightly positive quarter-on-quarter figure,” they told the Star website.
Williams and Casadio said: “There will be a small increase in consumption and a tiny positive contribution coming from international trade, counterbalanced by a modest contraction in investments.”
The academics said the two biggest contributions to GDP change on a quarterly basis are expected to be from government expenditure (an estimated 5% quarterly increase) and a sharp contraction in inventories, coming down from the high levels achieved last year.
Williams and Casadio said the impact of China’s reopening in 2Q23 would be partially offset by more negative global economic environment. “This will likely result in a sub-par quarterly growth that we estimate to be around 0.7% quarter-on-quarter and flat on a yearly basis,” he said.
Too early to predict Q2 GDP performance
Meanwhile, Carmelo Ferlito, Centre for Market Education chief executive officer, said as the “statistical anomalies” generated by the pandemic lockdowns fade, “external trade will still probably be the main driver of growth”.
According to Ferlito, it is still too early to predict the outlook for Malaysia’s 2Q23 GDP performance.
“The main element of concern to keep in account at the moment is, I believe, the scenario created by Silicon Valley Bank’s collapse and the risk of propagation.”
Williams and Casadio said the “positive evolution of inflation” should prevent private consumption to fall further in 2Q23.
“However, consumption is expected to contract 3% year-on-year in 2Q23, a shocking number compared to the 18.8% registered in the same quarter of last year.”
In a recent report MIDF Research forecast Malaysian inflation at 2.5% for this year.
On the outlook of the Malaysia’s GDP performance for the remainder of 2023, Ferlito said the country needs to rebuild its manufacturing base by attracting investments. He noted, however, that regional competition (especially from Indonesia and Vietnam) would be tough.
“So far, we have had some good announcements on investment schemes but we need to see the actual implementation. Furthermore, as mentioned, we need to closely monitor the world bank crisis.”
Williams and Casadio said 2023 would be a year of “the great transition” for the global economy – after a recovery in 2022 with 7% growth, they are predicting growth of 1.5% for 2023.
Steep rise in peer-to-peer lending
Funding raised via peer-to-peer finance in Malaysia grew to RM1.58bn (£291m) in 2022, up from RM1.14bn in 2021, according to the country’s Securities Commission (SC).
In its Annual Report 2022, released on 27 March, the SC said the total number of campaigns increased 71% to 24,455, up from 14,301 in 2021. At the end of 2022, the total number of issuers stood at 6,913.
In its report the regulator said: “Fundraising was successfully carried out via 24,455 campaigns. The majority of issuers in 2022 were based in Selangor and Kuala Lumpur at 38% and 16%, respectively, while technology-focused issuers formed two percent of total issuers.
“Campaign sizes in 2022 continued to be smaller fundraising amounts, with 70% of raising RM50,000 and below,” it added.
The wholesale and retail trade sector involving a motor vehicle and motorcycle repairs continued to receive the most funds in 2022, worth RM927.72 million.
Total funds raised since the inception of P2P financing stood at RM3.87bn via 54,791 campaigns, with nine per cent via Shariah-compliant campaigns.
