Malaysia’s Economic Recovery Strengthened in 4QCY21

Leading Index moderated in Oct-21. Malaysia’s leading index (LI) expanded for the second consecutive month albeit at a slower pace of +0.3%yoy in Oct-21 (Sep-21: +0.6%yoy), buoyed mainly by the rise in real imports of semiconductors, notably electronic integrated circuits.

The expansion in LI suggests growth momentum will continue in the coming months. However, on a monthly basis, the LI plunged by -0.9%mom (Sep-21: +4.3%mom), recording the first contraction in 3 months. Total trade rose to a new record high in Nov-21.

Malaysia’s total trade grew further by +34.9%yoy to a new record high of RM205.5b in Nov-21 following sustained expansion in both exports and imports. Exports rose faster at +32.4%yoy, underpinned by robust external demand from ASEAN, the US and European countries.

Imports growth also accelerated to +38%yoy, driven mainly by rising imports of E&E, petroleum and chemical products. Relative to the previous month, the trade surplus shrank to RM18.9b (Oct-21: RM26.2 billion).

We forecast stronger GDP growth next year. While keeping our GDP growth forecast for 2021 unchanged at 3.7%, we predict for growth outlook will be better next year with Malaysia’s GDP to grow at 6% in 2022.

The momentum of recovery is expected to continue next year as the economic reopening will support for continued growth in domestic consumption activity. Furthermore, we expect the improving business outlook and growing demand will drive businesses to increase production and investment activities next year. – MIDF