Stanchart: Faster growth of 4.8% for M’sia

Malaysia is expected to chart faster economic growth of 4.8% this year compared with 3.7% in 2023, supported by improving external demand in subsequent quarters, says Standard Chartered Bank Malaysia Bhd (Stanchart).

This optimistic forecast is buoyed by a robust increase in foreign direct investment and a resilient export, despite some ongoing challenges in the electronics market, the banking group said in its Global Focus – Economic Outlook Q2-2024 report yesterday.

It pointed out that for the first two months of the year, exports rose 3.9% yearon-year (y-o-y), a positive reversal from a 6.9% y-o-y contraction in the final quarter of 2023 (4Q23).

On a monthly average basis, it said trade surplus narrowed to Rm10.5bil, compared with Rm17.8bil in 2023, partly due to smaller electronics and commodity surpluses.

“The electronics trade surplus should catch up with the recovery in the global tech cycle,” Stanchart said.

It added that slightly higher crude palm oil prices have led to an improvement in the commodity trade balance in recent months.

On the services front, Stanchart expected the continued recovery in inbound tourism will further narrow the services trade deficit.

On the labour market, it noted that while the job market remained tight, which should support household spending, there has been a notable easing in conditions.

Malaysia’s unemployment rate stayed near record lows of 3.3% in January while the participation rate remained elevated at 70.2%.

However, Stanchart pointed out that employment growth slowed to 2% y-o-y from the 2023 average of 2.4%, while job vacancy-to-unemployed persons ratio fell to 0.2 times in 4Q23 from a peak of 0.8 times in June 2022.

The bank also noted that retrenchments edged up to about 15,600 in 4Q23 versus 8,700 in 4Q22.

As a result, it said wage pressures eased, with the average wage growth slowing to 1% y-o-y in 4Q23 versus 2.7% in 4Q22.

“This should provide Bank Negara some room to monitor the impact of the upcoming subsidy changes and not react too quickly,” it noted.