Malaysia’s economy demonstrated robust growth in the second quarter of 2024, achieving a 5.9% increase in Gross Domestic Product (GDP), marking a significant acceleration from the 4.2% growth seen in the first quarter. This notable performance was driven by strong domestic demand, buoyant export activities, and supportive policy measures.
The economic expansion was underpinned by a surge in household spending, which was fueled by favorable labor market conditions and enhanced government support. Investment activities also saw a boost, driven by ongoing progress in multi-year infrastructure projects and corporate expansion initiatives. The external sector played a critical role, with exports gaining momentum, particularly in electrical and electronics (E&E) products, benefiting from the global tech upcycle.
All major economic sectors contributed to this growth, with the manufacturing sector experiencing broad-based improvements, especially within the E&E cluster. The services sector also recorded strong performance, supported by consumer and business-related subsectors. On a seasonally adjusted quarter-on-quarter basis, the economy grew by 2.9%, a significant increase compared to the 1.5% recorded in the previous quarter.
However, inflationary pressures have started to emerge, with both headline and core inflation edging higher to 1.9% in Q2, up from 1.7% and 1.8% respectively in Q1. The rise in inflation was mainly attributed to increased costs in housing and utilities, which saw a jump to 3.1% from 2.6% in the previous quarter. Additionally, the share of Consumer Price Index (CPI) items registering monthly price increases rose to 49.4%, a reflection of price adjustments during the festive season and the impact of recent government policies.
Amid these developments, the Malaysian ringgit appreciated by 3.1% against the US dollar by mid-August 2024, with a 5.3% appreciation on a nominal effective exchange rate (NEER) basis. The strengthening of the ringgit was supported by coordinated initiatives from the government and Bank Negara Malaysia (BNM), along with increased inflows from government-linked companies and sustained market confidence.
Credit conditions remained favorable, with credit growth to the private non-financial sector rising to 5.4%, driven by increased business loan growth, particularly in the construction and manufacturing sectors. Household loan growth was steady, reflecting continued demand, particularly for mortgages.
Looking ahead, Bank Negara Malaysia projects sustained economic growth in the second half of 2024, driven by strong domestic spending and further improvements in external demand. However, the central bank cautions that downside risks remain, including potential global economic slowdowns, geopolitical conflicts, and fluctuations in commodity production. Inflation is expected to rise further due to the rationalization of diesel subsidies, though the impact is anticipated to be manageable.
