Economist: Domestic demand to support growth

Lee said Malaysia’s growth would be supported mainly by domestic demand given a weak external environment; and that Bank Negara is likely to hike interest rates by 50 basis points this year.

PETALING JAYA: Property developers are guiding for flat to higher new property sales, rubber glove players expect the operating environment to remain challenging, while plantation companies see crude palm oil prices remaining range-bound.

These are some of the key takeaways gathered from corporate companies at CGS-CIMB Research’s recent corporate day event.

In a note to clients following the event, the research house, quoting Lee Heng Guie of Socio-Economic Research Centre, said despite the possibility of a recession in the advanced economies, Malaysia would likely register a resilient 4.1% growth in 2023 versus 8.5% in 2022.“The United States and the European Union are expected to face a mild recession, and the decline in inflation is likely to be gradual.

“The US Federal Reserve is expected to maintain peak rates and to only reduce them in 2024 and China’s economic growth is likely to perform better especially in the second half of this year amid the removal of Covid-19 restrictions,” Lee was quoted as saying.

He also said Malaysia’s growth would be supported mainly by domestic demand given a weak external environment; and that Bank Negara is likely to hike interest rates by 50 basis points this year.

On the property front, the research house quoted seasoned property player Datuk N.K. Tong as saying the key challenges facing property developers are labour shortage, rising construction costs, affordability issues, and a global recession.

The government can help ease developers’ cost pressures by assisting in building material procurement, lowering compliance cost and taking over affordable housing development, according to Tong.

He also revealed that open market property prices were higher due to cross-subsidising of affordable housing projects.

“On the bright side, he shared that Malaysia’s house price-to-income ratio is 10% lower compared with the global average and the nation’s real house price growth is slowing down. Malaysia is still short of homes over the long term due to a smaller national average household size and a higher number of households,” noted the research house.

On politics, CGS-CIMB Research, quoted Ibrahim Suffian of Merdeka Centre who said if the unity government managed to assuage Malaysians’ economic concerns in the short-to-medium term, Pakatan Harapan and Umno would likely regain some of the Malay support they had lost to Perikatan Nasional (PN).

“It could put PN on the defensive if the government is able to turn Malaysia around.

“However, if this government and the component parties are not able to mollify the rakyat, it will not only risk collapsing prematurely but the Malay community’s support for PN will become indelible,” added Ibrahim.