Hong Leong Investment Bank Research said in a note, following the strong third-quarter gross domestic product (GDP) posting and better-than-expected economic releases thus far, it revised upwards Malaysia's 2022 GDP annual growth forecast to 8.2 percent from 6.5 percent previously.
"Although we still expect growth to moderate in 4Q22, following the absence of base effect and weakening external demand, the economy is expected to continue to be supported by domestic demand amid the improving labor market situation," said the research house.
However, following the darkening global outlook, it downgraded Malaysia's 2023 GDP to 4.2 percent from 4.5 percent previously. The growth forecast is still in line with the official forecast range of 4 percent to 5 percent.
Affin Hwang Investment Bank is also revising Malaysia's real GDP growth forecast higher to 7.5 percent estimated for 2022.
"With Malaysia's real GDP posting a broad-based performance in 3Q22, despite the slower pace of the global economy in the near term, we believe the domestic economy will continue to be supported by healthy labor market conditions, as well as the steady recovery in tourism-related industries," said the bank.
It said similar trends have also appeared in other ASEAN economies with a strong recovery in tourism-related sectors due to the reopening of international borders.
For 2022 as a whole, it expects Malaysia's economy to be driven by internally generated growth, especially from private consumption.
Based on its estimate, domestic demand is expected to grow significantly by 9 percent year on year for 2022 from 1.9 percent in 2021.
However, it believed growth momentum will start to moderate from the fourth quarter of 2022 and into 2023, thus, it downgraded the GDP growth for 2023 from 4.7 percent to 3.7 percent.
Meanwhile, UOB Global Economics and Markets Research said in a note it revised up Malaysia's 2022 full-year real GDP growth estimate up to 8.3 percent from 6.5 percent previously after taking into account a much stronger-than-initially-expected economic expansion of 9.3 percent in the first nine months of 2022 and a projected normalization to 5.5 percent growth in the fourth quarter.
"Our new GDP growth forecast for the entire year of 2022 will mark the strongest since 2000. It also suggests a possible upward revision in the government's growth target of 6.5 percent to 7 percent for 2022," it said.
According to the research house, favorable base effects, full reopening of economic and social activities as well as the country's borders, continued government subsidies and higher national monthly minimum wages are the main factors propelling Malaysia's GDP growth this year, amid strong global demand.
However, it said these positive effects on the domestic economy are expected to wane in 2023.
A confluence of more challenging external factors, geopolitical conflicts, elevated global inflation pressures, tighter central bank policy and global liquidity, rising financial volatility, and global tech downcycle, will further weigh on both global and domestic growth momentum next year, it said.
"As such, we maintain our growth outlook for next year with a moderate real GDP expansion of 4 percent, as compared to the official estimate of 4 percent to 5 percent," it said.
A 4 percent GDP growth projection for Malaysia next year also came after its house view for mild recessions in the United States, European Union, and Britain, a sensible growth rebound in China as well as softer growth for the rest of the Asian nations in 2023.
MIDF Research also said in a note it upgraded Malaysia's 2022 GDP growth projection higher to 8 percent from 6.6 percent previously, considering the stronger-than-expected growth in the third quarter.
"Even with 0 percent quarter-on-quarter growth in the next quarter, the 2022 GDP growth would be at least 7.7 percent," said the research house.
It said continued improvement in income and positive labor market conditions will continue to support consumption activity in the final quarter of 2022 and going into 2023.
However, it kept a cautiously optimistic view that Malaysia's economic growth will be supported by growing activities in the domestic economy, noting the outlook may be impacted by uncertainties from the external front.
According to the research house, new orders and export orders contributed to the deterioration in the manufacturing purchasing managers index (PMI), indicating signs of slowing demand.
Moreover, external demand could slow in the event of a global slowdown as final demand is expected to be constrained by a sharp rise in borrowing costs following policy tightening by major central banks.
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