Malaysia’s economy is growing at the fastest pace in over a year, outperforming regional competitors

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KUALA LUMPUR, Nov 11 (Reuters) – Malaysia’s economy grew at its fastest pace in over a year in the third quarter, beating the growth rate of many of its Southeast Asian peers, but the central bank said the outlook was clouded by the risk of a global slowdown.

Gross domestic product (GDP) rose 14.2% year on year in the July-September period, the fastest pace since the second quarter of 2021 and the first double-digit growth in over a year.

The growth came in above the 11.7% growth forecast in a Reuters poll and the previous quarter’s 8.9% annual increase, the central bank said. Growth was expected to beat the government’s forecast for an expansion of 6.5% to 7% this year.

The third-quarter jump was driven by continued expansion in domestic demand, a solid recovery in the labor market, solid exports and continued policy support, Central Bank Governor Nor Shamsiah Yunus said at a news conference on Friday.

It outperformed third-quarter growth in many of its regional peers, including Indonesia, the Philippines, Singapore and Vietnam.

However, BNM said the outlook was clouded by the risk of a global economic slowdown and forecast economic growth to slow to 4.0% to 5.0% next year. Major central banks have embarked on some of the most aggressive rounds of rate hikes in decades to curb inflation and risk a downturn in the global economy.

“We recognize that there are still some parts of our economy that have yet to return to pre-pandemic levels,” Nor Shamsiah said. “The slowdown in global growth will have a particular impact on Malaysia’s exports.”

Headline inflation likely peaked at 4.5% in the third quarter and is expected to moderate thereafter, but will remain elevated, BNM said.

Inflation in Malaysia has been largely contained this year by record levels of government subsidies and price control measures, but upside risks remain as the central bank announced its fourth straight 25 basis point rate hike last week.

Since May, BNM has hiked interest rates by a total of 100 basis points from an all-time low of 1.75% in a bid to dampen inflation.

The rate hikes come as the ringgit has fallen 10.8% against the US dollar this year, with the greenback being supported by the Federal Reserve’s aggressive monetary tightening.

Nor Shamsiah said the ringgit currency will adjust to reflect Malaysia’s economic fundamentals once uncertainties caused by US interest rate movements subside, without further elaborating.

“Malaysia is not in an economic crisis,” she said, adding that the country will not experience a recession next year.

Reporting by Rozanna Latiff and Mei Mei Chu; Editing by Ana Nicolaci da Costa

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