Malaysia's economy surpassed expectations by growing faster in the first quarter of this year, buoyed by household spending and a resurgence in exports.

However, some analysts cautioned that the rebound might be short-lived, as pressure on prices is anticipated to rise.

Between January and March, GDP increased by 4.2% compared to the same period a year earlier, as indicated by data from both the central bank and the government, surpassing the 3.9% growth forecast projected by a Reuters poll and the advance estimates released by the government.

Yet annual growth in the final quarter of 2023 was slightly revised downward to 2.9%.

Bank Negara Malaysia (BNM) and the Statistics Department reported at a joint press conference that exports increased by 2.2% on an annual basis in the first quarter, marking a turnaround from three consecutive quarters of contraction.

“Exports are expected to improve for the year... supported by sustained demand,” said BNM Governor Abdul Rasheed Ghaffour.

He added that risks to growth include weaker-than-expected global growth, decreased commodity prices, and the potential for further escalation of geopolitical conflicts, Reuters reports.

Furthermore, according to the data, on a quarter-on-quarter seasonally adjusted basis, the Malaysian economy expanded by 1.4%, in contrast to a 1% contraction in the fourth quarter of last year.

The central bank retained its economic growth projection for 2024, expecting growth to range between 4% and 5%. In 2023, the economy expanded by 3.7%, marking a significant decline from the 22-year high of 8.7% recorded in 2022.

BNM projects headline inflation to range between 2% and 3.5% for the year, factoring in planned subsidy and price control adjustments, the central bank governor added. Last year, headline inflation stood at 2.5%.

Since May 2023, BNM has maintained its policy rates unchanged, following a 25 basis points increase to 3.00%. During last week's policy meeting, the central bank highlighted inflation risks while continuing measures to bolster the weakened Ringgit. 

Abdul Rasheed reiterated on Friday that monetary policy continues to be supportive of the economy.

“Of course, some are of the view that our policy is tight, but this is certainly not the case,” he stated.