KUALA LUMPUR, Dec 1 — The slower contraction in Malaysia’s Leading Index (LI), which fell by -0.3 per cent year-on-year (y-o-y) in September 2023 versus -0.5 per cent in August 2023, indicates that Malaysia’s growth prospects are improving, said MIDF Research.

The current LI is the slowest fall in seven months of contraction, said MIDF Research in a note today.

MIDF Research expects the growth outlook to gradually improve in the fourth quarter of 2023 (4Q 2023).

"Despite the persistent moderate momentum because of the weak external trade, continued growth in the Coincident Index (CI) also signals the country’s economic growth remained in the positives, as shown by the sustained gross domestic product growth in 3Q 2023,” the firm said.

MIDF Research said Malaysia’s economic growth accelerated slightly to 3.3 per cent in 3Q 2023, (2Q 2023: 2.9 per cent y-o-y), similar to the advance estimate.

It added that the moderate below -4 per cent growth reflects the continued drag from weak external demand, while the sustained growth was anchored by the continued rise in domestic demand, thanks to growing spending activities on the back of positive job market conditions.

On the country’s headline inflation rate, MIDF Research said the figure is close to a three-year low, with the headline inflation rate registering at 1.8 per cent y-o-y in October 2023, the lowest since March 2021.

"The inflation rate was below market consensus of 1.9 per cent y-o-y. Non-food inflation rate stayed at 0.9 per cent y-o-y while the food inflation rate moderated to almost a two-year low at 3.6 per cent y-o-y.

"The softening inflationary pressure, among others, was due to high base effects and normalisation of global commodity prices,” it added.

MIDF also projected that Malaysia’s economy will grow at 4.2 per cent this year, moderating from a 8.7 per cent expansion in 2022.

"Despite the drag from weak external demand, the continued growth in domestic spending and investment activities underpinned the sustained growth this year,” it added. — Bernama