Malaysia economy sustains strong growth with investment surge
KUALA LUMPUR – Malaysia’s economy expanded as expected in the third quarter, while remaining on track to meet official economic forecasts on a surge in investments and increased domestic spending.
Gross domestic product rose 5.3 per cent in the July-September quarter from a year ago, matching the advance estimate and the median forecast in a Bloomberg News survey of analysts.
On a sequential basis, the economy expanded 1.8 per cent from the previous three months, according to Bank Negara and Malaysia’s statistics department on Nov 15.
Malaysia’s economy has largely recovered from 2023, supporting officials’ optimism that the full-year figure may surpass the initial forecast of 4 per cent to 5 per cent expansion.
The Finance Ministry in October raised its annual growth projection to 4.8 per cent to 5.3 per cent, and sees further improvement in 2025 as it looks to raise minimum wages and position the nation as a neutral haven for global investors with Donald Trump assuming the US presidency and potentially levelling tariffs against China.
The central bank said on Nov 15 it is liberalising its foreign exchange policy for international financial institutions to support investments in Malaysia, given greater interest by them to finance domestic projects.
Multilateral development banks and foreign financial firms can now issue ringgit-denominated debt securities for funding in Malaysia and provide ringgit financing to resident corporates, Bank Negara said.
This will spur the domestic bond and Islamic securities markets, with increased participation from international investors, it added.
Private investments had jumped 15.5 per cent in the third quarter, while spending by the government and public companies rose 14.4 per cent.
Bank Negara affirmed the Fnance Ministry’s revised growth forecasts for 2024 and 2025. Domestic spending will remain the main anchor for the economy, fuelling sustained growth, the central bank said.
Investments and continued improvement in exports, amid faster import growth, will also drive expansion, it said.
Malaysia’s narrowing interest rate differentials with the United States and domestic drivers will likely continue to buoy the ringgit, the central bank said.
Malaysia’s ringgit is the only emerging Asian currency to strengthen against the dollar in 2024.
Bank Negara said it will continue with coordinated measures with the government to support the ringgit, which may be vulnerable to pressure from geopolitical tensions and policy uncertainty after the US election.
A more gradual reduction in US interest rates is also a risk to the currency, the central bank said.
Malaysia’s policymakers have in 2024 encouraged state-linked firms, funds as well as companies in the private sector to repatriate their overseas income to help shore up the currency.