Malaysia's Economy Can Grow Above 4.0 Pct In 2024
KUALA LUMPUR, Aug 1 (Bernama) -- Malaysia’s economy can grow stronger than 4.7 per cent in 2024, up from 3.6 per cent in 2023, driven by rising domestic spending, increased business activities, and a recovery in external trade, according to MIDF Amanah Investment Bank Bhd (MIDF).
However, the investment bank is cautious that the growth outlook may be constrained by higher-than-expected inflation from further subsidy adjustment and the risk of slower growth in the major economies, particularly China and the United States (US).
In a research note, it said Malaysia’s labour market is likely to strengthen further in 2024, anticipating the average unemployment rate to remain at 3.3 per cent, backed by a steady upbeat momentum in the domestic economy and further recovery in external trade.
Additionally, MIDF continues to foresee a further decline in the 10-year Malaysian Government Securities (MGS) yield as foreign interest in the domestic bond market returned on expectations of narrowing Federal Fund Rate-Overnight Policy Rate (FFR-OPR) interest differential.
The expectation is based on the projected interest rate cut by the US Federal Reserve (Fed) later this year.
MIDF forecast that Bank Negara Malaysia would keep the Overnight Policy Rate (OPR) at 3.0 per cent in 2024 to ensure that the monetary policy remains supportive of economic growth, with inflation remaining under control.
"With the ringgit breaking under RM4.60 mark, we foresee further appreciation of the ringgit in the coming months as the Fed moves closer towards easing its policy interest rate," it said.
Meanwhile, it noted that changes in the producer price index (PPI) remained under control and have been influenced more by the movement in global commodity prices, although supply-side adjustments could push prices higher.
“The June 2024 PPI data also indicated that the one-off hike in diesel prices posed limited upside pressures on businesses," it said.
The investment bank predicted an average headline inflation rate of 2.7 per cent for 2024, believing that the government may need more time to refine the subsidy distribution and fuel price mechanisms, particularly for RON95.
"In our view, the targeted RON95 subsidy may commence in the fourth quarter of this year.
"Therefore, we anticipate an average inflation rate of 2.7 per cent due to the gradual implementation of targeted fuel subsidies and moderating food price growth," said MIDF.
As for retail trade, it expects consumer demand to stay in expansionary mode amid a stable job market, better pick-up in tourism activities and supportive and accommodative economic policies.
However, it noted downside risks to demand, especially with potential high inflation expectations and pessimistic consumer sentiment.
Meanwhile, despite the renewed decline in electrical and electronics (E&E) exports and softer export growth in June 2024, MIDF continues to expect the momentum for export growth to improve in the latter part of the year.
"We anticipate the recovery in E&E exports would be more encouraging in the second half of 2024 as Malaysia benefits from the improvement in the global E&E market," it added.
-- BERNAMA
