KUALA LUMPUR: Malaysia's economy may sustain its momentum after surprising the market with a faster-than-expected growth of 5.9 per cent in the second quarter (Q2) of 2024.
Economists said the latest gross domestic product (GDP) figure represents the strongest growth since Q4 2022, beating official estimates.
The Department of Statistics Malaysia had previously released an advance estimate of 5.8 per cent GDP growth for Q2 2024.
Bank Negara Malaysia governor Datuk Seri Abdul Rasheed Ghaffour said private consumption grew by 6.0 per cent in the quarter buoyed by positive labour market conditions and larger policy support.
Overall, Abdul Rasheed said the economy is expected to expand closer to the upper end of the 4.0-5.0 per cent range this year.
"But of course, it remains subject to the risk of global escalation of geopolitical conflicts and low expected commodity production," he told a press conference on the GDP for Q2 here today.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said both growth engines, the domestic and external demand, are firing on all cylinders in Q2.
In that sense, Afzanizam said the country is in a position of strength to weather the external uncertainties.
The implementation of fiscal reforms had resulted in improved policy space and infusing high degree of confidence among the investors which can be reflected in the appreciation of ringgit and stock market indices, he added.
"On that note, there is a chance that full-year GDP growth could settle at the upper end of the official range forecast of 4.0-5.0 per cent in 2024.
"To some degree, it could actually end up slightly above than 5.0 per cent as stable labour market conditions and policy support would help sustain the strong growth momentum," he told Business Times.
Afzanizam said Bank Negara will continue to remain vigilant with its monetary policy especially on the price front.
He said the focus for monetary policy is to ensure that the prevailing monetary stance is aligned with the upside risk to inflation.
At the same time, it will continue keeping a close tab on the external risks such as weaker global growth in major economies such as the US and China as well the implication from geo politics and the resultant effects to supply chain and commodity prices.
"For now, we expect the overnight policy rate to remain status quo for the rest of the year," he said.
Meanwhile, economist Dr Geoffrey Williams said the general Bank Negara statement is clearly positive across sectors, especially construction and services.
This reflects stronger spending across all categories, especially private consumption and private investment.
"This is private sector driven growth and shows that less involvement and interference by the government can provide space for private sector growth.
"This means the outlook for the whole year is more positive, perhaps in the 4.0-4.5 per cent range," he said.
Williams said while global headwinds may hold down exports, he the EPF's Akaun Fleksibel withdrawals will add more domestic consumption which will support growth.
"Interest rates are stable and the ringgit has strengthened so this provides a sound basis for the economy for the rest of the year," he added.