KUALA LUMPUR: Malaysia should see its economy moderating this year after outpacing its Southeast Asian peers as well as the forecasts by the International Monetary Fund (IMF) and the World Bank, with an 8.7 per cent growth in 2022.
Analysts cited softer external trade and tightening monetary policy in many economies as key factors for the moderate 2023 outlook.
At 8.7 per cent, Malaysia's gross domestic product (GDP) grew at the fastest pace in the region, and beat the 5.4 per cent projected by the IMF and 7.8 per cent by the World Bank.
The 8.7 per cent was also Malaysia's fastest annual expansion since 2000.
"It came above our estimate of 8.6 per cent and the official (Bank Negara Malaysia's) forecast of 6.5-7.0 per cent," UOB economists Julia Goh and Loke Siew Ting said.
Compared to the region, Malaysia's performance was ahead of Vietnam (8.0 per cent), the Philippines (7.6 per cent), Indonesia (5.3 per cent), and Singapore (3.8 per cent), they added.
Analysts at MIDF Research said Malaysia's GDP growth of 7.0 per cent in the fourth quarter (Q4) had met consensus expectations.
It was better than the firm's estimate, driven by the strength in domestic demand and higher contribution from net exports, MIDF Research said.
The firm expects Malaysia's GDP to moderate to 4.2 per cent in 2023, considering external headwinds and tightening monetary policy in many economies.
"The softer growth is mainly due to deceleration in external trade performance, taking into account the anticipated slowdown in global demand.
"We foresee global economic slowdown rather than a recession for 2023," it added.
MIDF Research said economic activities in most countries had grown
grew slower in Q4, affected by the lockdown in China, weaker global production activities and amid concerns
over high inflation.
The US economy grew further at 2.9 per cent quarter-on-quarter (qoq) on annualised basis even after the aggressive rate hike by the Federal Reserve last year, but the year-on-year growth was more moderate at one per cent.
China's Q4 growth slowed to 2.9 per cent yoy as spending and business activities were constrained by the strict Covid-19 lockdowns.
Euro area also recorded slower growth of 1.9 per cent, albeit slightly better than market consensus.
In Asia, said MIDF Research, domestic-driven economies like the Philippines and Indonesia had seen growth slowed but did not go below 7.0 per cent and 5.0 per cent respectively.
For other regional countries, GDP growth was more moderate (in Malaysia, Singapore, and South Korea) and even turned negative for Taiwan as a result of weaker regional production and trade activities.
"We reckon the momentum of growth would improve this year as China reopens its economy and international borders. Nevertheless, these trading nations are also exposed to softer demand outlook," it added.
Meanwhile, UOB kept its view for one more 25 basis points (bps) hike in the Overnight Policy Rate (OPR) by Bank Negara in May, bringing the rate to three per cent by mid-2023.
"The latest global developments and data suggest that many central banks are nearing the end of their rate hiking cycle.
"Two key inflation risks to watch include the impact of China's reopening on domestic inflation pressures, and the extent of potential changes to subsidies and price controls that could elevate the overall cost of living," it added.
