Malaysia’s strong 2Q GDP showing to lead to tighter policy stance

Amid higher than usual inflation.

The Malaysian economy recently posted a strong showing in the second quarter GDP growth, with headline growth registering 6.4% YoY, beating market expectation of 5.8%.

According to a research note from DBS, the main lift came from the external front but domestic engines such as private investment and consumption have remained strong.

Such strong growth momentum juxtaposed with the higher than usual inflation and rising leverage ratio within the economy will warrant a tighter policy stance.

DBS said that it expects the central bank to tighten monetary policy further after the 25bps rate hike in July.

Another 25bps hike in September is likely although comment from Bank Negara Governor Zeti is that policymakers will remain cautious not to over-shoot on policy.