RHB IB maintains 2024 GDP forecast at 4.6 pct

KU ALA LUMP UR: RH B Investment Bank Bhd (RHB IB) is maintaining Malaysia’s gross domestic product (GDP) forecast at 4.6 per cent year-on-year (y-o-y) in 2024 versus Bank Negara Malaysia’s (BNM) projected 4.0-5.0 per cent range, as domestic confidence has shown signs of improvement.

In a note yesterday, the investment bank said that there are three key proxies, specifically, higher manufacturing Purchasing Managers’ Index, increased imports of capital and intermediate goods, and rising business confidence, suggesting that manufacturers’ and businesses’ optimism are up.

“The GDP growth would be underpinned by the recovery in manufacturing sector activities and improvement in trade performance. The unfolding developments, like the strengthening of the Industrial Production Index and export momentum, reinforce our view.

“The trade performance is expected to be underpinned by a brighter global and regional economic outlook, China’s strengthening economic dynamics, and the re-acceleration in the global technology cycle,” it said. — Bernama

RHB IB also recognised the opposing effects on Malaysia’s GDP growth in 2024, albeit the balance of risks is tilted to the upside.

“The dampening effects may stem from the reduced subsidies, upward revision in services tax, and the implementation of lowvalue goods (LVG) tax, which cap consumer expenditure and disposable income from a wealth effect perspective.

“However, the impact would be cushioned by healthy labour demand conditions, continuation of social assistance to the targeted group, and differing impacts across income groups where the higher-income group has relatively inelastic demand,” it added.

Meanwhile, the investment bank expects the ringgit to strengthen towards 4.50 per US dollar at end2024.

For the first half of 2024, the US dollar carry against the ringgit remains strong as the market prices out Federal Funds Rate (FFR) cuts, suggesting the ringgit would be under pressure in the near term.

“Moving forward, our proprietary ringgit model suggests that the ringgit will be supported by the improvement in Malaysia’s fiscal and current account balances in 2024, as well as a narrower US-Malaysia rate differential following the anticipated FFR cuts in the second half of this year. We pencil that the earliest FFR cut is by September and another by December, to bring FFR to 4.75–5.00 per cent versus the current level of 5.25– 5.50 per cent,” it added. — Bernama