Leading index shows continued signs to better growth momentum

KUCHING: Malaysia’s leading index (LI) showed promising data, with signs of positive growth set to drive the economy in the near-term.

According to a report by the research arm at MIDF Amanah Investment Bank Bhd (MIDF Research), Malaysia’s LI rose faster at 3.2 per cent y-o-y in January 2024.

It pointed out that the pace of LI expansion in January 2024 was the strongest since August 2022, mainly supported by the rise in the number of registered companies and real imports of other basic precious & other non-precious metals.

The current economic conditions also continued to expand in January 2024 as the Coincident Index (CI) grew further by 3.2 per cent y-oy, the strongest growth in 10 months and the 29th straight month of expansion.

The better growth was also reflected in the monthon-month change as CI rose by 0.2 per cent m-o-m, the first growth after months of monthly contractions.

It pointed out that the growth was driven by increases in industrial production, capacity utilisation in the manufacturing sector and real EPF contributions.

“We continue to predict that growth prospects in Malaysia’s economy will be brighter in 1H24 particularly because of improved production and external trade activities as well as sustained growth in domestic spending activities,” MIDF Research said.

All in, the research team maintained its projection that Malaysia’s economy will grow stronger at 4.7 per cent this year, backed by both external and domestic demand.

“Nonetheless, we believe there are still downside risks, such as escalation of geopolitical tensions, another round of supply disruptions, fluctuations in the commodity and financial markets, and the possibility of weak growth in major economies, which could adversely affect Malaysia’s growth outlook, being a country exposed to the global trade and production network.

“On the domestic front, we are wary of the possible inflationary effect from the government’s planned policy changes, which could also affect consumer purchasing power, their sentiment and spending plans as well as the cost of doing business for the local businesses,” it added.