PETALING JAYA: The stronger-than-expected advance gross domestic product (GDP) numbers for the second quarter imply upside potential to the 2024 growth forecasts for Malaysia.
Economists are optimistic that with the recovery in external demand and global technology sector, higher investment flows and tourist arrivals as well as domestic spending, the country is on track of robust growth this year.
According to the Statistics Department, the country’s 2Q24 GDP probably grew 5.8% based on advance estimate, surpassing Bloomberg consensus estimate of 4.7% for the quarter.
This was an acceleration from 1Q24 growth of 4.2%, and it implied an average GDP growth of 5% for the first half of 2024 (1H24).
The 2Q24 GDP data is scheduled to be released on Aug 16.
Maybank Investment Bank (Maybank IB) Research said the advance 2Q24 GDP numbers showed quarterly growth momentum was gaining traction after the pick up in 1Q24; and this suggested upside to its current full-year growth forecast of 4.7% for 2024.
In its report yesterday, the brokerage said “signals of economic growth is gaining momentum year-to-date are also seen on the demand side of the economy, which are not captured by the quarterly GDP advance estimates.”
Maybank IB Research said its forecasts would be reviewed upon the release of actual and full 2Q24 GDP data.
Similarly, UOB Kay Hian (UOBKH) Research acknowledged the upside to its 2024 full-year GDP growth forecast of 4.6%, based on the advance 2Q24 GDP numbers and a continuation of year-ago lower base effects in 2H24.
“The ongoing global tech upcycle, higher tourist arrivals and spending, continued investment flows and implementation of catalytic initiatives under national master plans remain key growth catalysts amid lingering external uncertainties,” it said.
They include geopolitical tensions in the Middle East, China’s economic growth trajectory and the US presidential elections on Nov 5, the research house wrote in its report.
“The continuation of government support via targeted cash assistance and subsidies for lower and middle-income groups, coupled with a proposed salary hike for civil servants and withdrawals from the Employees Provident Fund’s Flexible Account will provide a fillip to private consumption,” it added.
TA Research also made no changes to its 2024 GDP growth forecast at 4.7%, pending the release of the actual 2Q24 data, while monitoring other relevant factors that could affect the growth trajectory such as the slowdown in China.
“Aside from the trade performance and crude palm oil production, crucial indicators for June like distributive trade index, industrial production index, construction statistics and the index of services have yet to be published.
“The economic trajectory of these indicators presents a hopeful outlook for Malaysia to potentially achieve our GDP estimate,” the research house wrote in its report.
Meanwhile, CGS International (CGSI) Research kept its 2024 GDP growth forecast at 5.2%, citing robust domestic demand that would continue to support the economy.
“We also think that recovery in external demand has supported economic growth following the increase in 2Q24 exports growth at 5.8% compared with 2% in 1Q24.
“This indicated that global demand is improving, although the risk of trade disruption could be exacerbated due to potential trade disputes, such as between the United States and China,” it explained.
Hence, CGSI Research said any disruption to trade flows would likely have a detrimental impact on Malaysia’s exports growth.
MIDF Research said the robust growth in the services and construction sectors, as shown in recent data, suggested possible upside surprises to its forecast could come from more resilient growth in domestic spending by both households and businesses.
“However, we are concerned that the 2024 growth outlook may be constrained by risks of slowdown in the major markets (such as the United States and China) and renewed constraint to global trade flow from escalation in the ongoing geopolitical conflicts,” it said.
“Moreover, the risk of higher inflation from policy changes could also hurt consumer sentiment,” the research house added.
