KUALA LUMPUR: Kenanga Investment Bank Bhd
has maintained its growth forecast for 2024 at 4.5 per cent to 5.0 per cent, with an upside bias towards hitting the upper-end target.
It said this was despite the Department of Statistics Malaysia’s (DOSM) stronger-than-expected second quarter 2024 (2Q 2024) advance gross domestic product (GDP) estimate of 5.8 per cent.
"While we anticipate steady growth in the second half of 2024 (2H 2024), downside risk persists, primarily stemming from the external sector.
"These risks include a potential slowdown in advanced economies due to the impact of a higher interest rate environment as reflected in the easing labour market in the United States (US),” it said in its Economic Viewpoint note today.
Kenanga opined that export performance remains fragile and dependent on China’s economic recovery and the performance of the US economy.
It said that escalating geopolitical tensions, notably the impact of the Red Sea crisis which has caused global port congestion and shipping delays, and renewed US-China tensions, as well as the uncertainty brought by global elections, particularly in the US could impact the global supply chain and sentiment, subsequently weighing on the growth outlook.
Domestically, the investment bank said the government’s fiscal reforms, particularly fuel subsidy rationalisation, could threaten consumer spending but are necessary to improve the nation’s fiscal health and rebuild future buffers.
"Likewise, we continue to expect domestic demand to remain the anchor supporting the growth trajectory, given the stable labour market and the positive impact of Employees Provident Fund’s Account 3 withdrawal alongside the continued increase in tourist arrivals,” it said.
Kenanga also expects a gradual recovery in the manufacturing sector, particularly the export-oriented and technology-related segments, thanks to the technology upcycle, which would further support domestic growth.
"This would be further bolstered by the realisation of previously approved foreign and domestic investments,” it said.
The DOSM, in its fourth quarterly advance GDP release, estimated 2Q 2024 GDP growth to expand by 5.8 per cent (1Q 2024: 4.2 per cent), bringing 1H 2024 average growth to 5.0 per cent.
Kenanga said this is higher than the house projection of 5.1 per cent and Bloomberg’s consensus of 4.7 per cent, with 16 estimates looking at a range of 3.7 per cent to 5.1 per cent.
DOSM will release actual 2Q24 GDP results, with detailed demand and supply breakdown, on Aug 16. - Bernama
