Analysis: Expect bumpy near-term economic growth

KUCHING: Based on Malaysia’s economic growth in the last quarter of 2023 (4Q23), analysts are cautiously optimistic on Malaysia’s economic growth this year, with bumpy growth path expected in the first half (1H) of the year before gradually pick-up in 2H.

In a report, the research team at TA Securities Holdings Bhd (TA Securities) noted that the shock of the pandemic is over, but the effects are still present.

The question now is whether 2024 growth would rebound partly due to the low base effect.

“In summary, we may see a bumpy growth path in the first half of the year before gradually pick-up in the second half.

“While some were discussing there is room for Bank Negara to cut the OPR should economic condition worsens, for now we don’t see any urgency for that to happen in the immediate term.

“This is despite some hints by major central banks in world that their respective monetary conditions will begin to ease.

“The next MPC meeting is on March 6 to 7, 2024. We will get further insights from Bank Negara in its upcoming Annual Report on March 20, 2024,” it said.

All in, it cut down its 2024 GDP forecast to 4.7 per cent y-o-y, totaling RM1.64 trillion.

“Initially, our anticipation was a 5.0 per cent y-o-y growth for this year. It is still within the 4.0 per cent to 5.0 per cent y-oy projection range made by the Ministry of Finance during the Budget 2024 presentation last year.

“While the economic landscape shows signs of improvement, it is still early to form a robust assumption, particularly given the limited actual data available to substantiate this higher growth rate,” it explained.

It is also now less optimistic on the private sector.

“Despite the stable labour market, income growth is not catching up. The Progressive Wage Model is still in the pilot project and there is no change in our RM1,500 minimum wage (while other Asean countries are revising their wages higher),” it added.

However, it highlighted that a good thing is the dominos effect from the tourism sector will help the services sector.

“Tourism Malaysia is confident of achieving 27.3 million foreign tourist arrivals this year due to several supporting sectors, including the government’s charter flight matching grant incentive, Visa Liberalisation programme and increasing tourism promotion activities abroad,” it added.

Another potential upswing is from in external demand, particularly from China.

“This expected turnaround in demand, especially from such a significant trading partner, bodes well for Malaysia’s export-driven sectors.

“Global tech upcycle will also add boost to our exports recover this year.

“We expect a bottoming out of the electronics exports downcycle, likely in the 2H24, which will help mitigate downside risks to exports growth.

“It is worth noting that E&E products comprised over 40 per cent of exports value in 2023,” it said.