KUALA LUMPUR, May 12 — Malaysia’s gross domestic product (GDP) is set to moderate to 4.2 per cent in 2023 amid external headwinds and tightening of monetary policy in many economies, said MIDF Research.
In a research note today, the research house said the softer growth is mainly due to the deceleration in external trade performance, considering the anticipated slowdown in global demand.
“Due to higher interest rates, pessimistic business sentiment as reflected in S&P Global PMI surveys and elevated inflationary pressures, as well as domestic demand in the United States and European Union will dampen this year,” it said.
MIDF Research said Malaysia’s real exports growth is projected to expand to three per cent from 12.8 per cent last year partially supported by improving services exports via tourism activity.
“As China reopens sooner than predicted, we are sanguine this will provide an extra boost to Malaysia’s services exports as well as tourism activity,” it said.
However, the research house believes that Malaysia’s external trade will continue benefiting from commodity exports, especially palm oil, crude petroleum and liquefied natural gas as the prices of crude palm oil and Brent crude oil will stay elevated at RM3,500 per tonne and US$86pbd for 2023.
“Agriculture and mining sectors are projected to expand at one per cent each while manufacturing output to grow modestly by 2.7 per cent for 2023.
“As for domestic sectors, the construction sector is anticipated to post stronger growth on the back of high development expenditure levels set by the government while the services sector to gain from softening inflationary pressure and improving labour market conditions,” it said.
Earlier today, Bank Negara Malaysia governor Tan Sri Nor Shamsiah Mohd Yunus announced that Malaysia’s economy recorded a better-than-expected expansion of 5.6 per cent in the first quarter of 2023 (1Q 2023) driven mainly by private sector expenditure.
She said the growth in 2023 was supported by further expansion of household spending, continued investment activity, improving labour market and higher tourism activities.
Commenting on the 1Q 2023 performance, MIDF Research said it was slightly above their forecast and exceeded market expectations of 5.1 per cent year-on-year.
Meanwhile, HSBC Asean economist Yun Liu said Malaysia’s relatively benign inflation dynamics also give consumers more purchasing power compared to regional peers.
“Part of the labour market improvement was thanks to an ongoing recovery in its inbound tourism, in particular from China.
“High-frequency data suggests that flights between the two countries have recovered to around 30 per cent of 2019’s level, providing some much-needed support to Malaysia’s services sector,” she said in a statement.
However, Yun said despite some resilience in the domestic economy, the external challenges will likely slow Malaysia’s growth in 2023.