Malaysia’s economy grew at a faster-than-expected pace in the first quarter of the year, vindicating the central bank’s hawkish pivot to fight inflationary pressures.
Gross domestic product expanded 5% in the January-March period from a year ago, according to Bank Negara Malaysia (BNM). That’s faster than the median estimate for a 4% growth seen in a Bloomberg survey.
Growth was driven by local demand and a recovery in jobs, the central bank said. The bank’s Monetary Policy Committee (MPC) unexpectedly raised borrowing costs this week to fend off price pressures as the economy appeared to be on an increasingly steady footing.
“If the positive growth trajectory continues and barring any unexpected shocks, it would be appropriate for the MPC to reduce the degree of monetary accommodation,” Governor Nor Shamsiah Mohd Yunus said at the central bank’s first in-person briefing in two years.
The central bank maintained its forecasts for full-year growth at 5.3%-6.3%, compared to last year’s 3.1% expansion. The authority also retained its price-growth forecast for the current year at 2.2%-3.2%.
The ringgit erased an earlier loss to be little changed at 4.3927 to a dollar after the data release. Still, the currency has declined for eight straight weeks and is trading at its weakest level in two years, an underperformance the central bank said came amid a strong greenback.
“If there are signs of growth picking up in the second quarter, another rate hike could be on the table in July,” said Winson Phoon, head of fixed-income research at Maybank Securities in Singapore.
The GDP data justifies the rate lift off by BNM, said Phoon, whose baseline forecast for the next rate hike is in September.
The faster expansion last quarter comes despite the country grappling with the outbreak of the omicron variant of coronavirus and damaging flash floods. Most curbs have since gone, with the nation already reopening its borders
