Malaysia's economic growth improved more than expected in the first quarter underpinned by the improving domestic demand and exports, data released by the Bank Negara Malaysia showed on Friday.
Gross domestic product expanded 5.0 percent on a yearly basis, faster than the 3.6 percent rise in the preceding quarter and also better than the economists' forecast of 4.0 percent.
On a quarterly basis, GDP went up 3.9 percent, but weaker than the 4.6 percent expansion posted in the fourth quarter.
The growth outlook for this year was maintained at 5.3 percent to 6.3 percent.
"This is underpinned by stronger domestic demand, continued expansion in external demand, and further improvement in the labor market," Bank Negara Malaysia Governor Tan Sri Nor Shamsiah said.
For 2022, in an environment of high input costs and improving demand, the bank forecast headline inflation to average between 2.2 percent and 3.2 percent.
Underlying inflation, as measured by core inflation, is also expected to trend higher during the year, averaging between 2.0 to 3.0 percent, the central bank said.
On the expenditure-side, private household spending logged a strong growth of 5.5 percent after rising 3.7 percent a quarter ago.
Gross fixed capital formation grew marginally by 0.2 percent, reversing a 3.0 percent drop a quarter ago. At the same time, growth in government spending accelerated to 6.7 percent from 1.6 percent.
Exports growth moderated to 8.0 percent from 13.0 percent. Likewise, the increase in imports was 11.1 percent versus 14.5 percent a quarter ago.
Malaysia's economy continued to rebound strongly at the start of this year and should grow at a decent pace throughout the rest of 2022, Alex Holmes, an economist at Capital Economics, noted. That said, there is still a long way for the recovery to go and the central bank is unlikely to rush its tightening cycle, which kicked off on Wednesday. Early this week, the central bank raised its key interest rate for the first time since 2018 citing global inflationary pressures. The benchmark Overnight Policy Rate was lifted by 25 basis points to 2.00 percent.