Malaysia’s economic growth in the second quarter surpassed all estimates on broad-based gains from manufacturing to consumption, suggesting a recovery seen at the beginning of 2024 is gathering speed.

Gross domestic product grew 5.8 percent in the April-June quarter from a year ago, according to advance estimates released by the Department of Statistics.

That was the fastest since the December quarter of 2022 and quicker than even the highest forecast of 5.1 percent. The performance follows a 4.2 per cent expansion in the first three months of 2024, and puts the economy on course to hit, if not surpass, the government’s projection of a 4 per cent to 5 per cent growth in 2024.

“Malaysia’s economy is expected to continue its growth momentum, supported by domestic and export-driven factors, with a positive outlook for the remainder of the year,” according to the statement. The final data is scheduled for release on Aug 16.

The robust growth data, along with potential price pressures arising from a reduction in fuel subsidies, supports the central bank’s decision to keep borrowing costs elevated.

Bank Negara Malaysia (BNM) last week pointed to sustained strength in the economy, aided by resilient consumption and improved exports due to the global tech upcycle, in announcing its decision to keep the policy rate unchanged at 3 per cent.

The figures are “extremely beyond” market expectations, and allow for the possibility that GDP may exceed 5 per cent in 2024, said Mr Mohd Afzanizam Abdul Rashid, an analyst at Bank Muamalat Malaysia. “Above all, this data should be positive for the ringgit as BNM is not about to reverse its course. Growth parameters look good now.”

Malaysia is poised to benefit “from a trifecta of positives” in 2024 – improving private investment, recovery in external demand, and resilient consumer spending – according to Maybank Investment Bank analysts Suhaimi Ilias and Wong Chew Hann in a note ahead of the data. They expect growth to come in at 4.7 per cent in 2024.

It is a positive turnaround for the US$400 billion economy, which saw growth moderate last year amid tepid global demand. The International Monetary Fund expects economic output to improve in 2024 to 4.4 per cent from 3.7 per cent in 2023.

The country recently drew billions of dollars of investment pledges from the likes of Google and Microsoft as Prime Minister Anwar Ibrahim positions Malaysia as a regional tech hub. At the same time, exports grew for a third straight month in June and will likely improve further. Cash handouts and higher wages for civil servants will also support domestic consumption.

Still, an uneven or slower recovery in China – Malaysia’s largest trading partner – could cloud the outlook for the South-east Asian nation, which also relies on Chinese tourists and investment to support economic activity.