Malaysia’s economy experienced significant growth in the second quarter of 2024, advancing by 5.9%, according to Bank Negara Malaysia (BNM) governor Datuk Abdul Rasheed Ghaffour. This impressive growth was attributed to several key factors, including strong domestic demand, a surge in exports, and increased household spending.
Strong Domestic Demand Powers Economic Growth
One of the primary drivers of Malaysia’s economic growth in Q2 2024 was the robust domestic demand. Abdul Rasheed noted that domestic demand was largely driven by private sector spending, reflecting the resilience and confidence of Malaysian consumers and businesses. The growth of household spending, in particular, was a significant contributor, with notable increases in consumption of food and beverages, transport, as well as restaurant and hotel services.
“The growth of household spending was attributed to higher consumption in food and beverages, transport, and restaurant and hotel,” said Abdul Rasheed during a press conference on the release of Q2 2024 GDP statistics.
Export Expansion and Investment Activities Bolster Growth
In addition to domestic demand, the continued expansion of exports played a crucial role in the country’s economic performance. Malaysia’s net export registered a positive turnaround, driven by a stronger recovery in exports and heightened external demand. The global technology upcycle also contributed to this positive trend, enhancing Malaysia’s export capabilities.
Investment activities also saw robust expansion, with businesses undertaking significant capacity expansion projects. This growth in investment was further supported by continued spending by the government and public corporations, which helped to sustain the momentum of economic growth.
“The growth in investment reflected robust capacity expansion by businesses as well as continued spending by the government and public corporations,” Abdul Rasheed added.
Sectoral Performance: Manufacturing, Construction, and Agriculture Lead the Way
Examining the performance of various sectors, the manufacturing sector expanded by 4.7%, reflecting the strong demand for Malaysian goods both domestically and internationally. The construction sector experienced an impressive 17.3% growth, driven by ongoing infrastructure projects and increased investments in the sector. Additionally, the agriculture sector grew by 7.2%, supported by favorable weather conditions and higher production levels. The mining sector also saw a modest rise of 2.7%, contributing to the overall economic growth.
Positive Labor Market Conditions and Increased Tourist Arrivals
The positive labor market conditions in Malaysia further supported the economic growth in Q2 2024. Higher household spending was a reflection of the improved employment situation, with more Malaysians finding stable jobs and experiencing income growth. Additionally, the country witnessed a significant increase in tourist arrivals, which provided a boost to the hospitality and retail sectors.
Ringgit Strengthens Amid Expectations of US Policy Rate Cuts
In terms of currency performance, the ringgit has appreciated by 3.1% against the US dollar year to date, as expectations of imminent United States policy rate cuts have eased pressure on regional currencies, including the ringgit. Abdul Rasheed explained that financial market participants are anticipating these rate cuts, which have softened the US dollar and alleviated pressure on the ringgit.
“The ringgit has been appreciating as of late with financial market participants expecting imminent policy rate cuts from the US federalism,” he said.
Looking Ahead: Malaysia’s Economic Outlook
Looking forward, Malaysia’s economic outlook remains positive, with the country expected to maintain its growth trajectory. The BNM governor highlighted that the global monetary policy path is shifting towards central bank easing, which could further support Malaysia’s economic growth.
However, Abdul Rasheed cautioned that financial markets remain susceptible to economic developments, including growth prospects and any divergence between market participants’ expectations and central banks’ actions.
“It is important to acknowledge that financial markets remain susceptible to economic developments, including growth prospects and any divergence between market participants’ expectations and central banks’ actions,” he emphasized.
Conclusion
Malaysia’s economy has demonstrated remarkable resilience and growth in Q2 2024, with a 5.9% increase in GDP driven by strong domestic demand, export expansion, and robust investment activities. As the country continues to navigate global economic challenges, the positive momentum is expected to persist, supported by favorable policy measures and a stable labor market. With a stronger ringgit and a promising economic outlook, Malaysia is well-positioned to achieve sustained growth in the coming quarters.
