Modest 4Q23, analysts still optimistic on growth
KUCHING: Based on advance estimate, Malaysia’s economy grew at modest pace of 3.4 per cent year-on-year (y-o-y) in the fourth quarter of 2023 (4Q23) but analysts are still optimistic on the country’s growth this year based on its leading index (LI) and coincident Index (CI).
In a report, the research team at MIDF Amanah Investment Bank Bhd (MIDF Research) opined: “Despite the still modest gross domestic product (GDP) growth in 4Q23, based on the trend in both LI and CI, we expect Malaysia’s economy will continue to grow anchored by a sustained rise in domestic spending and also supported by the expected recovery in external demand.”
It noted that Malaysia’s LI fell marginally by -0.2 per cent y-o-y in November 2023 (October 2023: -0.1 per cent y-o-y), the ninth straight month of contraction.
Decreases in approved housing units and real imports of semiconductors were limited by continued growth in Bursa Malaysia Industrial Index, which remained positive since May 2023. From month-on-month perspective, LI rose by +0.5 per cent m-o-m (October 2023: -0.1 per cent m-o-m), the first monthly increase after two months of contraction, underpinned mainly by higher real imports of semiconductors.
For the CI, the index increased further by 2.6 per cent y-o-y (October 2023: +2.9 per cent yo-y), expanding for the 27th straight month. The stronger CI growth of 2.8 per cent y-o-y in the two months to November 2023 (3Q23: 2.1 per cent y-o-y) was also reflected in the slight strengthening of GDP growth in 4Q23, according to advance estimate.
For the full year 2023, (based on the advanced estimate) MIDF Research noted that Malaysia’s GDP growth moderated to 3.8 per cent, below its estimate due to weakness in external trade and manufacturing activities.
Overall growth continued to be driven by sustained rise in domestic demand, it added.
“Given the relatively marginal fall in LI in October 2023 and November 2023 which still pointed to improving growth momentum in the short run, for now we are keeping our projection that Malaysia’s economy will grow stronger at 4.7 per cent this year (2023e: 3.8 per cent).
“The pick-up in growth will be supported by the external trade recovery, on top of the sustained growth in domestic spending.
“However, we are cautiously monitoring potential downside risks, such as escalation of geo-political tensions, another round of supply (and global trade) disruptions, fluctuations in the commodity and financial markets, and the possibility of economic recession in the US, which could adversely affect Malaysia’s external demand and overall growth outlook.
“On the domestic front, we are closely monitoring the factors that could impact the price outlook, which may effect overall domestic spending activities,” MIDF Research forecast.