KUALA LUMPUR: Affin Hwang Investment Bank Bhd expects Malaysia’s economy to grow by 4.5 per cent this year, against 4.0 per cent estimated for 2023, on the back of resilient domestic demand and improved economic fundamentals.
Chief executive officer Nurjesmi Mohd Nashir said domestic demand, which cushioned the decline in export growth last year, would continue to be supported by strong household spending and a recovery in tourism-related activities.
"The performance of Malaysia’s economy will partly depend on the global economic growth, particularly for external demand.
"However, with the resilient domestic demand, our research house is forecasting the economy to achieve a stronger expansion with a projected gross domestic growth of 4.5 per cent for 2024,” he said at the Macro and Market Outlook 2024 media briefing here today.
Affin Group chief economist Alan Tan Chew Leong said exports in most major economies are likely to recover in 2024, with China, the world’s largest exporter, benefitting the most.
He said the recovery in global exports would be positive for Malaysia as it could boost demand for electrical and electronic products, which also aligns with better prospects in global semiconductor sales.
On foreign direct investment, Tan said that as the advanced economies are expected to start cutting interest rates in the second half of 2024, investors would look at emerging countries, including Malaysia, for investment diversification.
He said other positive growth drivers for Malaysia include the higher development expenditure from better-than-expected fiscal revenue growth, stable inflationary pressure, and higher tourism receipts.
"We do not see any strong factor that will drive Malaysia’s inflation higher. Therefore, it will remain manageable,” he said.
Tan said the ringgit is expected to be one of the best performers in the region, together with the Japanese yen and Chinese renminbi, in light of recovery on the global front and improved economic fundamentals.
Affin Group believed the better ringgit versus US dollar exchange rate, which is likely to end 2024 at 4.40, coupled with stronger GDP growth, would be key catalysts to improve sentiment in the Malaysian equity market and also support a potential FTSE Bursa Malaysia KLCI (FBM KLCI) rebound later in the year.
Affin Hwang Investment Bank head of research Loong Chee Wei said the benchmark FBM KLCI would record a strong rebound this year, with 10.5 per cent year-on-year growth to 1,600 in view of higher corporate earnings growth.
He said the driving factors also include the economy’s structural reforms, accelerating infrastructure spending, advancing energy transition plans, reindustrialisation, and data centre expansion.
"The first half of 2024 would be weak, possibly due to concerns over the global economy and whether the US economy is going for a soft or hard landing.
"We are projecting for a soft landing, and that provides the catalyst for the market to rebound in the second half of this year,” he said.
For the broader market, Loong said it is likely to experience a sharper rebound to +10.2 per cent from -5.1 per cent last year, which indicates the opportunities in the non-index-linked counters’ performance.
He said five sectors had been placed with ‘overweight’ calls, namely construction, plantation, utilities, banking and property, on the back of their growth prospects in 2024. - Bernama
