KUALA LUMPUR: RHB Investment Bank Bhd has revised its 2022 gross domestic product (GDP) growth forecast to 8.5 per cent from an earlier projection of 8.0 per cent after a better-than-expected fourth quarter (4Q) consumer spending and trade performance.
"We expect the GDP growth to expand by 6.0 per cent year-on-year (y-o-y) for 4Q 2022 versus the Bloomberg consensus estimate of 7.0 per cent and 14.2 per cent y-o-y in 3Q 2022,” it said in a note today.
The investment bank has also upgraded its 2022 private consumption growth projection to 12.2 per cent y-o-y from 10.7 per cent and net export forecast to -13.8 per cent y-o-y versus the previous estimate of -18.1 per cent.
It said consumer spending is well supported by the resilient labour market conditions and pent-up demand, boosted by the relaxation of Covid-19 restrictions and tailwinds from past loose monetary and fiscal policies.
"Notwithstanding gradual slowdown in manufacturing sector activities, the labour market conditions have been well supported by a vibrant services sector.
"Within the services sector, the tourism-related industry showed favourable growth underpinned by expansions in the accommodation, transportation and storage, as well as food and beverages sub-sectors,” it said.
As for 2023, RHB Investment Bank is maintaining this year’s GDP growth forecast at 4.5 per cent y-o-y, versus Bloomberg’s consensus estimate of 4.0 per cent and the Ministry of Finance’s forecast of 4.0 - 5.0 per cent.
"Our outlook for 2023 remains cautiously optimistic, supported by resilient domestic demand. Private consumption is expected to remain the main driver of economic growth for the year.
"Nevertheless, headwinds from both external and domestic fronts are likely to weigh on the economy, especially in the first half (1H) of 2023,” it added.
On the external front, RHB opined that slower growth of major economies is also likely to affect Malaysia’s trade performance, and on the domestic front, issues of limited fiscal space, elevated living costs and labour shortages are likely to persist.
"Our 2023 overnight policy rate (OPR) forecast projection is at 3.25 per cent with another two possible hikes in 1H 2023.
"The balance of risks for 2H 2023 is tilted towards a 3.50 per cent peak depending on the magnitude and timing of an adjustment of the targeted fuel subsidy,” it said.
RHB Investment Bank said robust domestic demand coupled with negative real interest rates would continue to fuel core inflation pressures, while external pressures from the US Federal Reserve (US Fed) on OPR normalisation are receding as the US Fed’s stance is turning neutral. - Bernama