KUALA LUMPUR (Reuters) - Malaysia's economic growth hit its lowest point in nearly two years in the second quarter due to slipping exports and a global slowdown, prompting the central bank to warn on Friday that full-year growth would come in at the low end of its previous forecast.
The weaker outlook does not change most economists' expectations that the central bank will keep key interest rates unchanged this year as the Southeast Asian economy faces weakening global demand and a slowdown in major trading partner China.
Year-on-year growth in the second quarter reached 2.9%, central bank data showed. The expansion was the slowest since the third quarter of 2021, when the economy contracted 4.2%, and was lower than the 5.6% growth in the first quarter of the year.
Economists polled by Reuters had forecast gross domestic product growth of 3.3% in the April-June period.
Bank Negara Malaysia also said full-year economic expansion would come in at the lower end of the 4% to 5% range it had previously forecast, although some economists predict the target will be difficult to achieve as domestic demand also slows.
"Weak external demand is expected to weigh on growth in the near term. The economy faces downside risks from weaker-than-expected global growth and a deeper or longer-than-expected technological downturn," Governor Abdul Rasheed Ghaffour said. Press conference.
While the governor does not expect a global recession, he said global growth will be below the long-term average.
Malaysia, one of the world's biggest exporters of palm oil and liquefied natural gas, could also take a hit in commodity production due to El Nino and long plant maintenance, Abdul Rasheed said.
Improved tourist arrivals and faster implementation of domestic projects could bring some benefits, he added.
Other data on Friday showed Malaysia's exports fell 13.1% in July from a year earlier, worse than economists' forecasts of 11.3%. Imports also fell more than expected.
Bank Muamalat Malaysia's Mohd Afzanizam Abdul Rashid said the economic and trade data showed how vulnerable the economy was to a global slowdown.
Malaysian consumers are also likely to be cautious in their spending going forward, leading to slower economic growth in the second half, he said.
"In this sense, the risk that GDP may grow below the 4 to 5 percent projected growth is quite high," said Mohd Afzanizam.
Alex Holmes, chief economist at Oxford Economics, said the government's growth forecast of 4-5% looked out of reach, removing any appetite for rate hikes and even creating a chance for a cut.
"Domestic demand will struggle for momentum as weak exports feed into corporate profits and weigh on investment, hiring and wage growth," Holmes said.
Malaysia is also facing some outflow pressure from the ringgit, the worst performing currency in the region this year. BNM said it would intervene in foreign exchange markets to stabilize the ringgit, which has fallen more than 5% against the US dollar this year.
The currency strengthened by 0.2% on Friday despite weak data.
The central bank left key interest rates unchanged last month to moderate growth and moderate inflation, with economists saying they are likely to remain on hold for the rest of the year.
The central bank said on Friday that while cost pressures had eased, headline and core inflation would ease further in the second half, partly due to a higher comparative base last year.
A key player in the global economy, Malaysia has recently faced a significant economic setback as its gross domestic product (GDP) growth has seen a significant decline. This decline is attributed to a sharp drop in exports, which is casting a shadow over the national economic landscape. In this post, we delve into the factors contributing to Malaysia's weakest GDP growth in nearly two years and examine the implications of the decline in exports.
Main advantages:
1. Malaysia's economic performance at a glance:
Malaysia's economic trajectory has hit a stumbling block, with its GDP growth hitting alarmingly low levels. In the face of this challenge, a comprehensive analysis of the factors behind this decline is essential.
2. Export slump: Main culprit:
Malaysia's export slump emerged as the main driver of subdued GDP growth. Examining the causes and consequences of this decline in exports sheds light on the broader implications for the country's economic stability.
3. Dynamics of global trade and external pressures:
Understanding the complex web of global trade dynamics and external pressures that have affected Malaysia's export performance provides valuable insights into the root causes of the current economic scenario.
4. Structural and sectoral vulnerability:
Some structural and sectoral vulnerabilities in the Malaysian economy have exacerbated the impact of the export slump. Identifying these vulnerabilities helps formulate strategies to mitigate future economic shocks.
5. Political reactions and future prospects:
An analysis of the policy responses adopted by the Malaysian government and central bank to address the economic downturn provides insight into the country's future prospects for recovery and growth.
6. Lessons from the past:
Drawing parallels from historical examples of economic problems can offer a valuable lesson for Malaysia, which is going through this period of subdued GDP growth and declining exports.
7. The Way Forward: Navigating Uncertainties and Embracing Resilience:
Faced with a challenging economic situation, Malaysia must chart a resilient course for the future, capitalize on its strengths and take strategic measures to revive growth and restore economic stability.
Malaysia's recent decline in GDP growth, fueled by a sharp drop in exports, has raised concerns about the country's economic well-being. As Malaysia grapples with these challenges, a comprehensive understanding of the contributing factors and strategic policy responses is essential. By leveraging its resilience and proactive measures, Malaysia can pave the way for a better economic future and regain its position as a prosperous player in the global market.
Malaysia posted weakest GDP growth in almost 2 years as exports fell
Malaysia's economic environment has hit a stumbling block as the country posted its weakest GDP growth in nearly two years, largely due to a sharp drop in exports. This decline comes as a worrying development for both domestic and global economic stakeholders, raising questions about the factors contributing to this decline and its potential consequences.
Understanding the decline: Factors at play
One of the main factors contributing to Malaysia's weak GDP growth is the significant drop in exports. The country's economy has traditionally relied heavily on its exports, particularly in sectors such as electronics, palm oil and manufacturing. However, a combination of global supply chain disruptions, changing consumer demand patterns and increased competition from other markets has led to a sharp decline in demand for Malaysian exports.
In addition, ongoing global uncertainty stemming from geopolitical tensions and the lingering effects of the COVID-19 pandemic have exacerbated Malaysia's economic challenges. Reduced consumer spending, supply chain bottlenecks and labor market disruptions have combined to strain the country's economic recovery efforts.
Impact on the economy and more
Weak GDP growth has impacts outside the economic sphere as well. With reduced economic expansion, Malaysia could face challenges in sustaining job growth and easing the unemployment rate. In addition, the government's fiscal capacity may be limited, which may affect its ability to invest in critical infrastructure projects and social welfare programs.
From a global perspective, Malaysia's weakened economic performance may cause ripples in international markets. Business partners and investors may be wary, which could impact foreign direct investment and trade relations. Due to the country's export orientation, it is sensitive to fluctuations in global demand, which highlights the need for diversified economic strategies.
Navigating the road to recovery
To address these challenges, Malaysian policymakers and business leaders are being forced to take proactive measures. These may include fostering innovation and diversification within key industries, increasing domestic consumption to reduce dependence on exports, and investing in digital infrastructure to adapt to changing market dynamics.
In addition, Malaysia's position in the global market could strengthen building resilient supply chains and exploring new business partnerships. Public-private collaborative efforts will be key to developing strategies that support economic growth, job creation and sustainable development.
A recent slump in exports led Malaysia to its weakest GDP growth in nearly two years. The nation's economic resilience will be tested as it navigates global uncertainties and efforts to foster a more diversified and sustainable economic environment. By adopting strategic measures and fostering resilience, Malaysia can overcome these challenges and pave the way for a more robust economic future.
Malaysia, Southeast Asia's vibrant economy, is grappling with a worrying economic trend as it experiences the weakest GDP growth in nearly two years. A slump in exports emerged as a key factor contributing to this decline. This article delves into the key reasons for Malaysia's stunning economic performance, the impact of the decline in exports and the potential implications for the nation.
Understanding GDP Decline:
In a surprising turn of events, Malaysia's GDP growth hit its lowest level in almost 2 years. The economy, which has proven resilient to various challenges, now faces a significant obstacle. The slump in GDP growth raises questions about the country's economic strategy and its ability to withstand external shocks.
Export slump: the main culprit
One of the main reasons for Malaysia's lackluster GDP growth is the significant decline in exports. The country, known for its robust export-oriented economy, has seen a sharp decline in outbound shipments. Factors such as global market volatility, supply chain disruptions and changing trade dynamics have all played a role in this decline. The knock-on effects of continued global economic uncertainty have cast a shadow over Malaysia's export sector, affecting various industries including manufacturing and commodities.
Consequences of a trade war:
Ongoing trade tensions between the world's major economies have not spared Malaysia. The spillover effects of these conflicts have had an impact on the country's export-dependent economy and have limited growth prospects. As trade policies evolve and tariff barriers shift, Malaysia finds itself in a complex international trade environment that directly affects its economic performance.
Domestic factors amplifying the challenge:
While external factors have ndeed contributed to Malaysia's subdued GDP growth, it is essential to recognize that there are domestic dynamics at play. Internal issues such as regulatory hurdles, labor market issues and infrastructure bottlenecks have added to the strain on the country's economic trajectory. Addressing these factors will be key for Malaysia to regain its economic momentum.
Potential implications and future outlook:
The consequences of Malaysia's weakest GDP growth in almost 2 years go beyond the economic sphere. A slowdown in growth can impact employment, consumer sentiment and the overall investment climate. Policy makers and industry leaders are faced with the task of implementing measures to stimulate economic activity, strengthen competitiveness and restore investor confidence.
Malaysia's recent struggle with the weakest GDP growth in nearly two years due to slumping exports underscores the complex interplay between global economic factors and domestic problems. As the nation navigates this downturn, a comprehensive strategy that addresses both foreign trade dynamics and domestic challenges will be vital to reviving economic growth and sustaining long-term prosperity.
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