KUALA LUMPUR: Malaysia's gross domestic product (GDP) is expected to rebound to 5.6 per cent in the fourth quarter (Q4) as the economy steers back on recovery path, MIDF Research said.
For the full year, the firm estimated the GDP to grow 3.7 per cent, marking the first year of growth after the 5.6 per cent contraction in 2020.
"Going forward, we expect growth outlook would be relatively better in 2022 as the economy will continue to expand supported by the continued rise in consumer spending and investment activities. In addition, growing external demand will also lend support to growth outlook this year.
"Nevertheless, there are several risks to growth outlook such as possible worsening of the pandemic due to new variants, delayed recovery in the global supply condition, rising inflation, slowdown in China, and policy withdrawals by major monetary authorities," it said.
MIDF Research said the reduced stress on the healthcare system and the progress of vaccination programme allowed the government to gradually reopen the economy.
Following the relaxation of lockdown restrictions, sentiment started to improve even from Q3 2021, with the increase in indices for consumer sentiment and business condition.
"Confidence among consumers generally improved supported by encouraging labour market condition, and as a result more consumers indicated plans to increase their spending. Although the consumer sentiment index weakened in Q4 2021, consumer spending plans continued to improve despite concerns over rising prices," the firm said.
"In another survey, the Business Tendency Survey also shows that the level of confidence and expectations on sales outlook among businesses and industries improved further in Q4 2021. Confidence for all sectors rose to -0.3, the highest since Q1 2020, while expectations on revenue jumped to 13-quarter high at 33.5," it added.
MIDF Research said looking at the performance of foreign trade, the positive contribution from net exports was expected to contribute to the rebound in GDP growth in Q4 2021.
Both exports and imports expanded faster in Q4 2021, growing at 29 per cent year-on-year (Y-o-Y) (Q3 2021: 15.8 per cent Y-o-Y) and 29.6 per cent Y-o-Y (Q3 2021: 21 per cent Y-o-Y), respectively.
"With diversified export products, Malaysia benefited from the recovery in global demand for manufactured goods and commodities, especially electrical and electronics (E&E), palm oil and refined petroleum.
"Meanwhile, higher imports were supported by purchases of capital and intermediate goods from abroad as companies resumed and increased production in anticipation of better demand. Moreover, recovery in consumer spending also led to higher imports of consumption goods," it added.