Malaysia’s Growth Misses Estimates Amid El Niño, Export Woes

Malaysia’s economic growth missed expectations in the second quarter of the year, expanding at the slowest pace in nearly two years on weakened global demand and the El Niño weather pattern.

(Bloomberg) — Malaysia’s economic growth missed expectations in the second quarter of the year, expanding at the slowest pace in nearly two years on weakened global demand and the El Niño weather pattern.

Gross domestic product growth for the April-June period moderated further to 2.9% from a year ago, according to the central bank and Department of Statistics Malaysia on Friday. That’s below the median estimate of 3.3% increase in a Bloomberg survey. The economy expanded 1.5% on a sequential basis.

The ringgit held on to its gains after the data. The currency is up 0.2% to 4.64 per dollar. The ringgit is among the worst performers in Asia this month, with a loss of about 3%. The KLCI stocks index fell 0.1% at the close in a second day of losses.

The worse-than-expected print led analysts at United Overseas Bank and Oversea-Chinese Banking Corp to lower their full-year growth forecasts to 4% from 4.4%. Still, the performance in the April-June period “is not bad” given the external outlook and normalization of domestic demand, according to UOB’s Julia Goh and Loke Siew Ting.

The results came amid weak overseas demand for goods, even as the confluence of hot weather and prolonged plant maintenance hurt commodity and mining sectors respectively. 

As trade-reliant Southeast Asian nations face external headwinds, they are increasingly looking to boost domestic consumption. The results have been mixed so far, with Indonesia and Vietnam faring better than expected in the second quarter, while the Philippines, Singapore and Malaysia seeing the pace slow amid lingering price pressures.

Thailand, which is due for an economic pulse check next week, is expected to report slower expansion as growth in China, its largest trade partner, falters.

Domestic demand and increased tourism activity are supporting growth, said Governor Abdul Rasheed Ghaffour at a briefing in Kuala Lumpur, noting that full-year performance may be closer to the lower end of the forecast range of 4% and 5%. This would mean GDP expansion must average 3.7% in the second half to reach the target, he said. 

In the meantime, household spending will remain a key growth driver, aided by wage growth and ample financial buffers, he said. BNM expects inflation to further moderate over the rest of 2023, while trade is seen improving toward the end of the year and into 2024, he added.

Risks to the inflation outlook include higher commodity prices on worsening geopolitical events, adverse weather conditions, and higher import cost, he added. BNM maintained its forecast for price pressures to average between 2.8% to 3.8% this year.

On monetary policy, the central bank reiterated its commitment to stay vigilant to ongoing developments and would continually monitor incoming data to assess the outlook of inflation and growth.

Borrowing costs are expected to stay unchanged at 3% throughout the year and into 2024, according to OCBC analyst Lavanya Venkateswaran. “We expect BNM to remain focused on containing inflationary pressures and keeping financial imbalances in check,” she wrote in a note Friday.

The ringgit’s value will continue to remain market determined, and BNM’s presence is only to prevent excessive volatility and ensuring orderly conditions, the governor said.

“The GDP data may put some pressure on the ringgit, though the impact will be limited,” said Irene Cheung, a senior strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “We are paying attention to the impact of El Nino on the economy, as it may affect inflation and hurt growth further.”

Malaysia will maintain its responsive fiscal policy and focus on expediting the realization of approved investments to support growth, Prime Minister Anwar Ibrahim said in a statement Friday. The government is confident of meeting its GDP growth forecast of 4% to 5% for 2023, he added.

–With assistance from Kok Leong Chan, Tomoko Sato, Cecilia Yap, Kevin Varley, Ailing Tan, Karl Lester M. Yap, Matthew Burgess and Cynthia Li.

(Updates with details throughout.)

More stories like this are available on

©2023 Bloomberg L.P.