Summary

• Malaysia’s gross domestic product (GDP) expanded by 5.9% in 2Q2024, surpassing the advance estimate of 5.8% (1Q2024: 4.2%). The acceleration in household spending and sustained strong double-digit growth in gross fixed capital formation were key drivers. Exports surged by 12.3% in July (June: 1.7%), driven by a broad-based increase in manufacturing exports. In July, we upgraded our 2024 GDP forecast to 4.8% from 4.2% and will continue to monitor for further upside potential.
• The ringgit appreciated by 4.8% month-to-date (MTD), reaching a 16-month high of 4.38 against the US dollar. The broad dollar weakness that began in July is driven by rising market expectations of a US rate cut in the upcoming September Federal Reserve (Fed) meeting. The market-implied rate cuts increased to four cuts from 2-3 cuts for 2024 as the US labour market continues to soften.
• Financial market optimism has rebounded following the recent price correction. The broad bond market continued its rally in August, reflected in the double-digit decline in US Treasury (UST) and German Bund yields. The 10-year Malaysian Government Securities (MGS)-UST yield differential narrowed further to -2.5 bps in August MTD (July: -37 bps).
• US headline inflation continued to ease, while eurozone inflation remained steady. Malaysia’s headline inflation remained steady at 2.0% in July, averaging 1.8% year-to-date (YTD). Despite a wide official inflation projection range of 2.1% to 3.6% for 2024, recent reductions in subsidies have had limited impact, keeping inflation low.