Malaysia’s economy expanded as expected in the third quarter, while remaining on track to meet official economic forecasts on a surge in investments and increased domestic spending.
Gross domestic product rose 5.3% in the July-September quarter from a year ago, matching the advance estimate and the median forecast in a Bloomberg News survey of analysts. On a sequential basis, the economy expanded 1.8% from the previous three months, according to Malaysia’s central bank and statistics department Friday.
Malaysia’s economy has largely recovered from last year, supporting officials’ optimism that the full-year figure may surpass the initial forecast of 4% to 5% expansion. The Finance Ministry last month raised its annual growth projection to 4.8% to 5.3%, and sees further improvement next year as it looks to raise minimum wages and position the nation as a neutral haven for global investors with Donald Trump assuming the US presidency and potentially leveling tariffs against China.
Bank Negara Malaysia said on Friday it is liberalising its foreign exchange policy for international financial institutions to support investments in Malaysia, given greater interest by them to finance domestic projects. Multilateral development banks and foreign financial firms can now issue ringgit-denominated debt securities for funding in Malaysia and provide ringgit financing to resident corporates, BNM said.
This will spur the domestic bond and Islamic securities markets, with increased participation from international investors, it added. Private investments had jumped 15.5% in the third quarter while spending by the government and public companies rose 14.4%.
The central bank affirmed the ministry’s revised growth forecasts for 2024 and 2025. Domestic spending will remain the main anchor for the economy, fuelling sustained growth, the central bank said. Investments and continued improvement in exports, amid faster import growth, will also drive expansion, it said.
Malaysia’s narrowing interest-rate differentials with the United States and domestic drivers will likely continue to buoy the ringgit, the central bank said. Malaysia’s ringgit is the only emerging Asian currency to strengthen against the dollar this year.
BNM said it will continue with coordinated measures with the government to support the ringgit, which may be vulnerable to pressure from geopolitical tensions and policy uncertainty after the US election. A more gradual reduction in US interest rates is also a risk to the currency, the central bank said.
Malaysia’s policymakers have this year encouraged state-linked firms, funds as well as companies in the private sector to repatriate their overseas income to help shore up the currency.
Inflation in 2025 is expected to average from 2% to 3.5%, and factors in the government’s planned subsidy reform.
