Economic Focus: 1Q24 GDP - Steady recovery

20 May 2024


  • 1Q24 GDP grew +4.2% y-o-y driven by solid domestic spending and turnaround in external trade
  • Strong 2024 prospects underpinned by robust investment activities, healthy household spending and improving exports
  • We remain cautiously optimistic of Malaysia’s prospects and maintain our 2024 GDP growth projection of 4.3% y-o-y
Strong growth trajectory

Malaysia's economy grew 4.2% y-o-y and 1.4% q-o-q on a seasonally adjusted (SA) basis in 1Q24 (4Q23:+2.9% y-o-y; -1.0% SA q-o-q), which was higher than the advance estimate of 3.9%. The higher-than-expected 1Q24 GDP was largely due to the resilient domestic market, notably driven by the Services, Construction and Mining sectors. Overall, 1Q24 domestic demand grew by 6.1% y-o-y - the strongest quarterly growth since 2022 while net exports saw a narrower contraction amid the recovery in goods and services.

Favourable economic landscape

1Q24 domestic consumption continued to be boosted by sustained expansion in the labour market with historic high labour force participation rate, resulting in strong private consumption growth of 4.7% y-o-y. In addition, 1Q24 capital expenditure surged to a multi-year high growth of 9.6%, signifyig the positive impact arising from record-high approved investments in 2021-2023 and various government-led strategic developments under national blueprints. Meanwhile, net exports fell 24.5% y-o-y in 1Q24 (vs -52.9% in 4Q23), but this is expected to improve steadily moving forward, in tandem with stronger demand and inbound tourism.

Sustained expansion in domestic economy

Within the Services sector (59% of 1Q24 GDP; +4.7% y-o-y), the Wholesale & Retail Trade sub-sector grew by 3.8% y-o-y (vs 4.4% in 4Q23) while Transportation and Storage sub-sector growth remained strong at 11% y-o-y (vs 12.8% in 4Q23). Apasrt from continued strength in household spending, continuous improvement in tourism industry also contributed to the growth momentum in the Services sector as international passenger traffic at KLIA recovered 90% of pre-pandemic level in 1Q24 (vs 78% in 4Q23). Menawhile, the Construction sector outperformed with a 11.9% y-o-y growth given better progress of civil engineering projects and residential developments.  

Anticipating better manufacturing output

The Manufacturing sector increased 1.9% y-o-y in 1Q24 (vs -0.3% in 4Q23) due to construction-related activities and petroleum-related products. Notably, the E&E industry has yet to pick up meaningfully despite the global tech cycle rebound due to Malaysia's large exposure in the back-end of the semiconductor value chain. Nevertheless, we are encouraged by the improving trend of global semiconductor shipments as well as positive trade data among key Asian trading hubs. Confidence indicators among manufacturers are also pointing towards a sustained recovery in 2024. Therefore, we believe Malaysia's manufacturing sector should register a marked improvement in 2H2024, leveraging on its diversified export base and deep integration into global supply chain.

Maintain 2024 GDP growth of 4.3%.

Malaysia is set to benefit from the resilient domestic demand, underpinned by robust labour market and strong economic and social activities, especially tourism-related activities. Meanwhile, private investment is expected to benefit from improved external environment and positive response to the NETR and NIMP 2030 while the government continues with it s expansionary fiscal policy to drive economic growth.