Economic growth momentum to stay weak through 2H23 but upside seen for 2024
RAM Ratings expects Malaysia’s economic momentum in the second half of 2023 (2H23) to remain challenged by soft global demand and other headwinds.
In its Economic Update 2023 report, RAM Ratings projected Malaysia’s GDP growth in 2023 to slow to four to five per cent from 8.7 per cent in 2022.
“Overall GDP growth decelerated to 4.2 per cent y-oy in 1H23 (2H22: 10.4 per cent) as global trade slowed and the semiconductor downcycle bit into exports.
“Exports declined 6.4 per cent y-o-y in volume terms in 1H. Base effects knocked the figures down further.
“Domestic demand, the key driver of economic growth, was also softer at 4.5 per cent in 1H23 compared to 9.9 per cent in the second half of last year, as spending behaviour normalised,” it explained.
The weakening momentum seen in 2Q23 is likely to persist through the rest of the year as external headwinds loom large, it said.
“A spike in global food and commodity prices due to supply distortion by geopolitics and/or tariffs is a key downside risk that could inflate domestic prices and put a brake on local consumption demand.
“Lacklustre global demand, aggravated in particular by China’s property crisis, could
crimp Malaysia’s export growth,” it added.
Nevertheless, it pointed out that there are bright spots on the horizon that could see the country eke out growth of 4.5 per cent to 5.5 per cent in 2024.
“The labour market continues
to stay robust, powering domestic demand. Recent data also indicates tentative signs of the current electrical and electronic (E&E) downturn bottoming out, potentially lifting exports next year.
“The resolution of labour
shortage issues could provide additional impetus to growth of laggard sectors like agriculture and construction. Bets are now increasingly on a soft landing for the US economy, leading to possibly a less severe global slowdown,” it said.