MIER's Nambiar forecast the Malaysian economy to expand moderately within the range of 4.3% to 4.6% in 2024.
PETALING JAYA: While business and consumer sentiment in Malaysia showed signs of recovery in the fourth quarter of 2023 (4Q23), both continued to have a guarded outlook on the economy ahead, according to a local think-tank.
The Malaysian Institute of Economic Research (MIER) said the Consumer Sentiments Index (CSI) in the final three months of 2023 has shown a positive trend, rebounding from its lowest point in 3Q23.
The 4Q23 CSI stood at 89.4, reflecting a noteworthy increase from the 3Q23 score of 78.9, which was the lowest recorded in recent years.
Meanwhile, the Business Conditions Index (BCI) indicated that confidence among local manufacturers is starting to recover.
In 4Q23, the BCI increased by 9.3 points compared to the previous quarter, reaching 89 points.
On an annualised basis, the BCI also experienced a 3.1-point rise from 85.9 points.
Companies continue to express confidence in the outlook for the next three months, with particularly high optimism observed in the beverage and textile sectors.
It is, however, noteworthy that both indices remained below the 100-point threshold of optimism.
MIER head of research Shankaran Nambiar forecast the Malaysian economy to expand moderately within the range of 4.3% to 4.6% in 2024.
This is following an anticipated modest growth of 3.9% in 2023.
“Resilient domestic demand and stable labour market conditions continue to be the key drivers of growth in 2024.
“Additionally, the country’s growth momentum and export performance may receive a positive boost if there is a recovery in the global semiconductor industry,” he said.
However, Nambiar cautioned there are several potential risks that may hinder Malaysia’s 2024 growth prospects.
“The government must look to temper the downside risks stemming from the sluggish outlook in China’s economy, increasing geopolitical uncertainties in the Middle East, a surge in financial stress in developing economies due to high interest rates worldwide, and climate change.
“The sluggish outlook of the Chinese economy is due to weak domestic activity, a slump in the property market and persistent deflationary pressures,” he said in a statement.
MIER remarked that while the latest CSI has shown a slight uptick quarter-on-quarter, it is clear that consumer sentiments remain pessimistic.
When it comes to expectations of income in relation to inflation, MIER said this has been a chronic problem for many years.
“However, consumer expectations of their spending plans do not seem to have taken a significant hit as a result, with commitment to expensive spending on housing and cars remaining stable, which should bring some optimism to policymakers who hope to see strong economic growth in 2024.”
As for the domestic business confidence, MIER said businesses showed a lower level of optimism.
Both domestically and globally, various factors have contributed to this subdued outlook, challenging the economic landscape.
Companies are facing an urgent need to proactively increase their sales and domestic orders.
“As businesses grapple with uncertainty, policymakers and industry leaders must collaborate to address the root causes of the subdued sentiment.
“To BCI recovery, strategic interventions, adaptive policies and proactive measures are essential to build confidence, stimulate economic activity and pave the way for a more optimistic business environment in the coming quarters,” it added.
The think-tank also said businesses hope the support allocated for micro, small and medium enterprises in Budget 2024 will aid their survival and contribute to the realisation of the Madani Economy vision.
Looking ahead into 2024, MIER expects Malaysia’s economic growth to continue being driven by resilient domestic demand and stable labour market conditions.
“Moreover, the country’s growth momentum and export performance depend on the global semiconductor industry.
“Specifically, an improvement in global electronics and integrated circuit sales may create positive spillover effects for Malaysia’s electrical and electronics sector by increasing production and stimulating export performance,” it said.
