HLIB Research said Malaysia’s economy is expected to expand at a more moderate pace for the remainder of the year.
PETALING JAYA: Malaysia’s full-year gross domestic product (GDP) is on track to grow at least 5% this year, driven mainly by growth in domestic demand.
The advance GDP growth rate of 5.3% for the third quarter (3Q24) of 2024 suggested that the economy had expanded 5.1% for the first nine months of the year.
Brokerages polled by StarBiz estimated that based on the latest figures, full-year growth would reach at least 5%, in line with the government’s projection of 4.8% to 5.3% for 2024.
In its report, Hong Leong Investment Bank (HLIB) Research said Malaysia’s economy is expected to expand at a more moderate pace for the remainder of the year in view of the softening growth momentum in advanced economies, uneven recovery in the global manufacturing sector as well as ongoing geopolitical conflicts.
“Nevertheless, growth is expected to remain supported by sustained domestic spending, underpinned by the stable employment landscape and supportive income measures, including Employees Provident Fund Flexible Account 3 and the civil servant wage hike in December,” it wrote.
“Growth is also expected to be lifted by higher investment activity,” it added, noting approved investments for the first half of 2024 (1H24) had increased to RM160bil from RM135.6bil in 1H23.
All in, HLIB Research maintained its 2024 full-year GDP growth forecast at 5%.
While TA Research said consumer spending could potentially slow down towards the end of the year, it noted that a series of positive macroeconomic and financial indicators prompted it to revise its forecasts upward.
These included the manageable inflation rate average at 1.8% for the first nine months of the year and the steady jobless rate at 3.2%.
“Taking these conditions into account, we have revised our full-year GDP growth forecast to 5% for 2024 (previously 4.7%), with a projected growth of 5.2% in the third quarter (previously 4.7%) and 4.7% in the fourth quarter (previously 4.2%),” TA Research said.
Also forecasting a 2024 full-year GDP growth of 5%, Kenanga Research said it anticipated growth to slow further in the final quarter to around 4.6%, as growth momentum typically eases on a quarter-to-quarter basis.
“The growth outlook remains vulnerable to external factors, including a potential slowdown in advanced economies due to the lag effects of higher interest rates. Heightened geopolitical tensions in the Middle East and Eastern Europe also pose risk, disrupting the global supply chain,” it explained.
“Malaysia’s exports remain fragile, heavily dependent on China’s recovery and the US economic performance. The expected ringgit appreciation against the US dollar could reduce export receipts, especially from the United States,” it said.
It pointed to September’s export data, where total exports fell by 0.3% down from a 12% rise in August, far below market expectations.
Overall, domestic demand remains the key growth driver, supported by a stable labour market, rising tourist arrivals and ongoing realisation of approved investment, Kenanga Research said.
“While we are cautious on the export outlook, we expect tech-related segments in the manufacturing sector to benefit from the global tech cycle. Against this backdrop, we maintain our 2024 GDP growth forecast at 5%,” it added.
Meanwhile, CIMB Research maintained its 2024 GDP growth forecast at 5.2%, and projected growth of 5% for 2025, consistent with the government’s target of 4.5% to 5.5% for next year.
“This reflects the continued recovery in external demand driven by the global tech upcycle, as well as strong domestic spending supported by robust investments and resilient consumer spending,” it said.
“However, downside risks remain, particularly from uncertainties surrounding the outcome of US elections and heightened geopolitical tensions, which could dampen global trade activities and exacerbate global inflationary pressures,” it added.
CGS International Research also maintained its 2024 GDP growth forecast at 5.2%, following the encouraging advance GDP estimate for 3Q24.
“We think the upbeat 3Q24 GDP performance was driven not just by domestic factors but was also externally driven, given the improvement in trade activities. In our recent trade note, we highlighted that 3Q24 exports expanded 7.8%,” it said.
“We think the positive momentum in exports will continue following the improvement in the trade volume as well as the strength in manufacturing shipments,” it added.
