Malaysia's Q2 GDP grew strongly by 5.9%, with annual growth expected to approach 5%. (2)

Malaysia's GDP in the second quarter of 2024 grew by 5.9% year-on-year, the strongest growth rate since the end of 2022, and the full year growth is expected to be close to 5%.

Datuk Abdullasim, Governor of Bank Negara Malaysia, pointed out at a press conference today that the second quarter economic growth accelerated, thanks to a good labor market and increased policy support, which led to an increase in household spending and improved exports.

With the strengthening of growth momentum, Bank Negara Malaysia still maintains its original forecast of 4% to 5% annual growth, but Abdullasim said that the final growth rate is expected to be close to 5%.

Under the support of stable domestic demand, strong investment activity, and improved export performance, we believe that Malaysia's GDP growth rate this year will fall in the upper end of the 4% to 5% range.

He added that various indicators show that the country's economic growth prospects can continue into the second half of the year, such as further recovery of global orders driving export performance, issuance of more projects, and improved business confidence.

As for whether to consider adjusting the growth forecast, Abdullah said it depends on the announcement of the latest fiscal budget.

In any case, domestic demand remains cautious about potential downward risks to growth, including lower-than-expected external demand, escalated geopolitical conflicts, and lower-than-expected production of commodities in our country.

In the second quarter, private consumption increased by 6% year-on-year, higher than the 4.7% in the first quarter; private investment also increased by 12% year-on-year, compared to a growth rate of only 9.2% in the first quarter.

Net exports turned from a 24.5% year-on-year contraction in the first quarter to a 3.4% increase in the second quarter.

In addition to the slowdown in mining growth to 2.7%, other sectors of the economy showed strong year-on-year growth, with the construction industry's growth rate of 17.3% being the most impressive.

Following that is agriculture (+7.2%), services (+5.9%), and manufacturing (+4.7%).

In addition to Abdullah, Dr. Mohd Uzir Mahidin, Chief Statistician of the Malaysian Statistics Department, also attended the press conference.

Due to the controlled impact of rationalization measures for subsidies, Bank Negara Malaysia believes that inflation for the whole year should not exceed 3%.

The Governor of Bank Negara Malaysia, Abdul Rauf Siddiqui, pointed out that the impact of rationalization of diesel subsidies so far has been quite limited. Although the impact of related policies on inflation will expand in the second half of the year, Malaysia's annual inflation is believed to not exceed 3%, only close to 3%.

"We can see that the impact of rationalization of diesel subsidies so far has been limited, thanks to the government taking various measures to mitigate the impact on the business community. Therefore, without considering additional impacts, it is unlikely that inflation this year will exceed 3%."

In any case, Abdul Rauf Siddiqui stated that Bank Negara Malaysia still maintains its annual inflation forecast of 2% to 3.5%, and the upward risks of inflation include stronger-than-expected spill-over effects from domestic subsidy and price policies, geopolitical tensions and climate issues leading to higher prices for commodities, as well as external factors such as the US presidential election and policies of various central banks, resulting in expanded import costs.

In the first half of the year, Malaysia's overall inflation averaged 1.8%.

Regarding the impact of the potential rationalization of subsidies for RON 95 gasoline by the government, Abdul Rauf Siddiqui stated that this, like the changes in diesel subsidy policies, has long been taken into account by Bank Negara Malaysia. The forecasted inflation of 2% to 3.5% already reflects the potential impact of these factors.

In addition, regarding the issue of gradual salary increases for civil servants starting from December this year, Abdul Rauf Siddiqui stated that this is generally favorable for economic growth but may also push up inflation.

"Bank Negara Malaysia will closely monitor the impact of relevant policies on growth and inflation next year."

With the Ringgit strengthening against the US Dollar by 3.1% since the beginning of the year, Bank Negara Governor Abdul Latif said that the Ringgit is moving in the right direction.

Abdul Latif pointed out that now the prospect of a rate cut by the US Federal Reserve is clearer, boosting the recovery of the Ringgit and other regional currencies, making the Ringgit move in the right direction.

The Ringgit has recovered from its previous weakness and now better reflects Malaysia's strong fundamentals and improved economic growth prospects. We believe that the Ringgit is moving in the right direction.

He reiterated that the Ringgit's performance is mainly influenced by external factors, especially the interest rate differentials between Malaysia and foreign countries.

Now, with a clearer prospect of a rate cut by the US Federal Reserve, it is favorable for the Ringgit's outlook.

However, Abdul Latif also mentioned that if the future monetary policy decisions of central banks differ from market expectations, it will cause volatility in the foreign exchange market.

In addition, Abdul Latif pointed out that Bank Negara does not set a target for the Ringgit exchange rate nor has a so-called 'comfortable exchange rate level', stating that the movement of the Ringgit is ultimately determined by the market.

Vice-Wen: The PBOC expands the "Qualified Resident Investor" program.

In addition, Adullahai pointed out that the PBOC will expand the "Qualified Resident Investor (QRI)" program to simplify the foreign investment process for businesses, in order to encourage more companies to repatriate their overseas investment income to the country.

After the QRI program started trial running in April of this year, the effect has been good, with approximately $1 billion (approximately 4.43 billion Malaysian Ringgit) in funds repatriated from overseas to the country and converted into Ringgit. Therefore, we have decided to expand the program and hope to increase the number of participating companies to 30.

Through the QRI program, participating companies can more easily reinvest the funds repatriated to the country in foreign countries.

Abdullahai stated that the purpose of the QRI program is to simplify the foreign investment process for domestic companies, and thereby encourage businesses to repatriate more of their external investment income to Malaysia.

This is a program that should continue.