The Sun (Malaysia)

Malaysia’s domestic growth seen continuing

Underpinne­d by resilient demand, stable labour market and tourism-led services sector recovery: Research house


Malaysia’s domestic growth is likely to continue, supported by resilient demand on the local front amid steady labour market conditions and further improvemen­t in the services sector.

The services sector will be backed by a gradual increase in tourism activities, despite the expectatio­n of a continued slowdown in the global growth outlook, said Kenanga Research.

The slower-than-expected recovery in China’s economy and the lag effect of the higher interest rate environmen­t led by advanced economies, however, have resulted in the research firm revising its 2023 gross domestic product (GDP) growth forecast for Malaysia to between 3.5 and 4.0% from 4.7% (2022: 8.7%), it said in a research note.

This was also in line with the slower-thanexpect­ed GDP growth performanc­e in the second quarter of 2023 at 2.9% against 5.6% in the first quarter.

This came as the manufactur­ing purchasing managers’ index (PMI) in August saw a lower reading which reflects a persistent weakness in manufactur­ing conditions, largely due to subdued demand from overseas.

This was also partly due to the higher base effect recorded last year and as the economy returned to normalcy with the absence of stimulus measures, it said.

Malaysia’s manufactur­ing PMI remained unchanged in August at 47.8 from July, reflecting a subdued demand in the third quarter. The index has remained in contractio­n level (below the neutral level: 50.0) for the twelfth consecutiv­e month or since September 2022.

Public Investment Bank is anticipati­ng Malaysia’s PMI trajectory to mirror the global trend, with expectatio­ns for it to persist below the 50-point threshold for the remainder of the year.

“The country’s manufactur­ing output is expected to align with the short-term cyclical downturn witnessed in the semiconduc­tor industry, which has been persistent­ly grappling with adverse growth conditions,” it said in a research note.

Its projection­s indicate that the manufactur­ing sector as a whole would experience a further moderation of only 2.0% for this year (8.1% in 2022).

“Presently, there are limited signs of a recovery in the electrical and electronic­s (E&E) industry, (amid) a moderation in the pace of contractio­n this year,” it added.

MIDF Research sees the weakness in the manufactur­ing sector for Malaysia as in line with the global manufactur­ing trend and “therefore with the still weak PMI readings the sluggishne­ss would continue in the second half this year amid subdued global demand”.

This was seen in PMI readings at below 50 in August for Japan (49.6), the Philippine­s (49.7), South Korea (48.9), Taiwan (44.3), Thailand (48.9), the euro area (43.5) and the United States (47.9), it noted. – Bernama

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