Malaysia's gross domestic product (GDP) edged higher by 5.6 % year-on-year (YoY) in the first quarter (Q1) of 2023, lifted by the expansion of household spending, continued investment activity, improving labour market and higher tourism activities.

Bank Negara Malaysia (BNM) governor Tan Sri Nor Shamsiah Mohd Yunus said further improvement in the labour market, with strong employment growth and continued wage expansion, have also supported private consumption spending.

Nor Shamsiah said investment activity was underpinned by capacity expansion and multi-year project implementation.

"Inbound tourism continued to recover, lifting services exports and partially offsetting the slower goods export growth.

"On the supply side, the services and manufacturing sectors continued to drive growth," she said at today's press conference.

On a quarter-on-quarter, seasonally adjusted basis, the economy grew by 0.9 % from -1.7 % posted in the fourth quarter (Q4) of 2022.

Headline inflation during the quarter trended lower to 3.6 % from 3.9 % in Q4 2022 due mainly to the moderation in core inflation and the lower RON97 price.

Nor Shamsiah said the decline in core inflation by 3.9 % in Q1 2023 from 4.2 % in the previous quarter was primarily contributed by selected services.

"These include telephone and telefax service, food away from home, and personal transport repair and maintenance.

"Even as cost pressures, particularly global commodity prices, continued to ease, core inflation remained elevated during the quarter amid continued strength in demand. As a result, price pressures remained pervasive," she said.

Despite global headwinds, Nor Shamsiah said the Malaysian economy is projected to expand by 4.0 % to 5.0 % in 2023, driven by firm domestic demand.

She said that improving employment and income and continued implementation of multi-year projects would support consumption and investment activity.

Moreover, Nor Shamsiah said higher inbound tourism activity would lift high-touch service industries.

"Risks to Malaysia's growth outlook are relatively balanced. Upside risks stem mainly from domestic factors.

"These include stronger-than-expected tourism activity and the implementation of projects, including those from the re-tabled Budget 2023.

"Meanwhile, downside risks could emanate from lower exports due to weaker-than-expected global growth and more volatile global financial market conditions," she added.