KUALA LUMPUR, Jan 24 — Malaysia’s 2024 gross domestic product (GDP) growth is expected to be resilient at 4.2 per cent year-on-year versus the forecast growth of 3.8 per cent in 2023 despite the weak external backdrop, according to OCBC Bank.
Chief economist Selena Ling said the growth will be mainly supported by domestic demand factors, namely a stabilisation in private consumption growth and higher investment spending, backed by a strong medium-term reform agenda.
She said private consumption growth has been volatile since the onset of the pandemic after a period of relatively stable growth of 7.0 per cent from 2010 to 2019.
“Anecdotal evidence suggests that the pandemic significantly impacted household balance sheets and savings were drawn out.
“However, as the scars of the pandemic fade into 2024, we expect private consumption growth to normalise, albeit settling at a lower rate versus pre-pandemic levels,” she told a media briefing on Malaysia’s 2024 economic outlook here today.
For this year, the bank is cautiously optimistic about Malaysia’s growth outlook, with export demand expected to be buffeted by numerous factors, including slower global growth, fading commodity tailwinds and persistent geopolitical tensions.
“The bottoming of the electronics export downcycle may provide much-needed support to export growth, and to that end, we forecast goods export growth to remain negative at -1.0 per cent y-o-y in 2024, although this is still better than last year.
“Resilient tourism inflows in 2024 will also provide some support for overall services,” it said in a statement.
According to OCBC Bank, Malaysia’s reform momentum has started to gain traction since the second half of 2023 and is expected to be supportive of investment spending.
It noted that Prime Minister Datuk Seri Anwar Ibrahim and his administration have launched numerous medium-term plans since July 2023.
These include the introduction of the Madani Economy, the National Energy Transition Roadmap (Part I and II), the New Industrial Masterplan 2030, the Mid-Term Review of the 12 Malaysia Plan, the Fiscal Responsibility Act and Government Procurement Act and Budget 2024.
While many of these plans are medium-term in nature, the immediate impact will be continued fiscal consolidation and reallocation of resources towards investment spending and infrastructure projects, OCBC Bank said.
The government introduced the Central Database Hub (Padu) database in January 2024 as a precursor to a more targeted fuel subsidy mechanism, it also noted.
OCBC Bank said Brent crude prices are expected to remain broadly stable at US$80 per barrel in 2024 versus US$82 per barrel in 2023 allowing for commodity-related revenue collections to remain somewhat supported.
“The government forecasts the 2024 fiscal deficit to narrow to 4.3 per cent of GDP from 5.0 per cent of GDP in 2023. We think this is achievable at this juncture.
“More fundamentally, Prime Minister Anwar’s government is keen to attract foreign direct investments and position Malaysia as a leader within the region. These measures will build greater economic resilience and boost investor sentiment,” it said.
— Bernama
