PETALING JAYA: Despite Malaysia’s growth likely to have slowed more than expected in 2023, economists maintain their views that the country’s gross domestic product (GDP) would grow at a faster pace this year.
CGS-CIMB Research, for instance, maintained its GDP growth forecast at 4.6% in 2024, while Hong Leong Investment Bank (HLIB) Research said it expected GDP growth to normalise at 4.8% in 2024.
Advance estimates from the Statistics Department showed GDP likely grew 3.8% in 2023, which was below the government’s forecast of 4% for that year.
This would be a marked slowdown from the 8.7% GDP growth in 2022.
The GDP weakness was expected to be driven by external factors, while domestic demand remains resilient.
According to the government agency, advance estimates showed GDP growth at 3.4% in the fourth quarter of 2023, which was below the Bloomberg consensus forecast of 4.1% for that quarter.
This compared with a GDP growth of 3.3% in the preceding quarter.
Bank Negara is scheduled to release the actual fourth-quarter and full-year GDP performance on Feb 16.
CGS-CIMB Research said while the external side would likely stay sluggish this year, domestic consumption was expected to continue to anchor growth in 2024.
“While there is downside risk to consumption from the rollout of new taxes and subsidy adjustments, we think it will be gradual. In addition, the planned monthly cash handouts could offset new taxes adequately,” it added.
CGS-CIMB Research noted a boost from tourism, especially with the visa-free programme for tourists from India and China; the robust labour market with a falling unemployment rate, high labour participation rate and ample wage growth; as well as an accommodative overnight policy rate (OPR) should support growth this year. Similarly, HLIB Research said it expected GDP growth in 2024 to be driven by an improvement in global trade activity, the ongoing recovery in the tourism sector, steady labour market and realisation of investments that had already been approved.
Nevertheless, it cautioned that Malaysia could face downside risks emanating from the escalation of geopolitical risks in the Middle East, Western area or even in the South China Sea.
In addition, it said, a more entrenched inflationary environment would also have negative consequences on global monetary conditions, with central banks being forced to maintain a more restrictive monetary policy environment.
“These downside risks could lead to more volatile global financial environment and weaker economic growth.
“Notwithstanding these downside risks, we anticipate Malaysia’s GDP to improve in 2024,” HLIB Research explained, adding that it expected Bank Negara to maintain the OPR at 3% in 2024.
Meanwhile, TA Research said despite the softness in advance estimates for 2023’s fourth-quarter GDP, there was a possibility for positive contribution from the upcoming December data to enhance the final quarter reading.
“As of now, aside from trade performance and crude palm oil production, crucial indicators like the distributive trade index, industrial production index, construction statistics and the index of services are yet to be published,” the brokerage said.
“The economic trajectory of these indicators might provide a hopeful outlook for Malaysia to achieve a more favourable figure in the final quarter,” it added.
TA Research said any necessary adjustments to its 2024 GDP forecast would be made during the release of the actual GDP number next month.
It had earlier forecast a GDP growth of 5% for 2024, versus 4% for 2023.
