KUALA LUMPUR – Malaysia’s economy expanded by 3% in the fourth quarter of 2023 while the overall annual growth normalised to 3.7%, following strong growth registered in the previous year.
Meanwhile, Bank Negara Malaysia said the ringgit appreciated by 2.1% against the US dollar in the fourth quarter of 2023, in line with regional currencies following a broad-based depreciation in the greenback.
The unemployment rate declined to the pre-pandemic level of 3.3% while the labour force participation rate was at a historic high in 2023.
“On the domestic front, despite the lapse of large policy support provided as the economy started to open up in 2022, the continued recovery in economic activity and labour market conditions supported growth in 2023. In addition, the solid growth performance of the economy is reinforced by a resilient external position.
“In terms of monthly GDP, December recorded a growth of 1.4%, lower than November (3.8%) and October (3.9%), attributed mainly to the shorter school holiday period during the month and weaker export-oriented manufacturing sector,” said the regulator.
“Exports, however, remained subdued due to prolonged weakness in external demand amid stronger imports. On the supply side, there was a broad-based expansion. The commodities sector grew. This was supported by higher oil and gas production as well as expansion in the agriculture sector amid improved labour supply.
“The services and construction sectors continued to expand. The manufacturing sector remained soft from continued weakness in the electrical and electronics industry.
“Household spending remained supported by improving labour market conditions and easing cost pressures.”
Meanwhile, headline inflation continued to decline to 1.6% during the quarter (Q3 2023: 2%).
The downward trend was contributed by the moderation in fresh food inflation (Q4 2023: 0.5%; Q3 2023: 1.9%) and core inflation (2%; Q3 2023: 2.5%).
The lower core inflation was largely driven by an easing in services sub-segments, including food away from home and repair and maintenance of personal transport.
Inflation pervasiveness continued to trend lower, as the share of consumer price index items recording monthly price increases moderated to 36.3% during the quarter (Q3 2023: 40.8%).
This brought inflation pervasiveness below its fourth quarter long-term average (2011-2019) of 41.7%. For 2023, headline inflation declined to 2.5% (2022: 3.3%) while core inflation averaged at 3% (2022: 3%).
Despite the challenging external environment, the current account surplus for the year 2023 was sustained at 1.2% of GDP, supported by a diversified export structure across market and product.
The strength in external position is also reflected in the external debt, which declined to 68.2% of GDP in 2023 (Q3 2023: 69%), and a higher net international investment position at 6.6% of GDP in 2023 (Q3 2023: 5.2%).
One-third of the external debt is denominated in ringgit, limiting currency risk, while around 70% of debt have medium and longer-term tenures.
In 2024, inflation is expected to remain modest, broadly reflecting stable cost and demand conditions. However, the inflation outlook remains highly subject to changes to domestic policy on subsidies and price controls, as well as global commodity prices and financial market developments. – February 16, 2024