Resilient consumer spending likely to spur growth

Maybank IB Research projected Malaysia’s gross domestic product growth to accelerate to 4.4% for 2024 from the estimated 3.9% for 2023.

PETALING JAYA: Malaysia’s economic growth is expected to be stronger this year, driven by resilient consumer spending and sustained private and infrastructure investment momentum.

This momentum will also be supported by the expected recoveries in trade-related services and manufacturing industries, namely tourism and electronics, according to Maybank Investment Bank (Maybank IB) Research.

The brokerage projected Malaysia’s gross domestic product (GDP) growth to accelerate to 4.4% for 2024 from the estimated 3.9% for 2023.

Globally, however, it projects a slower GDP growth of 2.8% for 2024, as compared to the estimated 3.3% for 2023, reflecting the lower growth it estimated for the United States and China and sub-1% expansion for Europe. For the United States, it expects GDP to slow to 1% in 2024 from 2.2% in 2023, while China’s GDP growth is estimated at 4.4% for 2024, as compared with 5.2% in 2023.

In its recent report, Maybank IB Research said the outlook of resilience in consumer spending growth in Malaysia was based on favourable labour market conditions and worker and consumer-friendly policies such as the implementation of progressive wage policy and consumer-friendly Budget 2024 measures.

These include the “special bonus” for civil service employees and retirees and higher allocations for financial assistance programmes for low and low-middle income individuals and households.

Positive investment growth momentum, on the other hand, is expected to be sustained by the development expenditure under Budget 2024; realisation of private sector investments; and progress in ongoing major infrastructure projects as well as the introduction of new ones.

Overall, Maybank IB Research said 2024 should be a “take off” year for Malaysia’s medium-to-long-term economic “transition” outlined in the blueprints, masterplans, roadmaps and legislations that were unveiled between July and October 2023.

These included the Madani Economy; National Energy Transition Roadmap; New Industrial Master Plan; 12th Malaysia Plan Mid-Term Review; Hydrogen Economy and Technology Roadmap; Fiscal Responsibility Act and Energy Efficiency and Conservation Act.

Fiscal reforms and economic restructuring would be high on the agenda, it noted.

“Key element of fiscal reform in 2024 is targeted fuel subsidy rationalisation while the main item under economic restructuring is Progressive Wage Policy to address cost of living, adequacy of retirement savings and equality issues,” Maybank IB Research said.

“There will also be sector and industry-specific policy announcements and measures plus legislations as “follow ups”, that is, Government Procurement Act; establishment of renewable energy exchange; blueprints for high-value, high growth sectors and industries (such as technology and digital; modern agriculture and agro-based; rare earth elements); and the updated National Automotive Policy,” it added.

On restructuring and reforms for Malaysia’s economy, Maybank IB Research said “political will” remained key, especially on fuel subsidy rationalisation.

The brokerage expected the country’s inflation to be higher at 3% in 2024, as compared with the estimated 2.6% in 2023.

“Consequently, we expect Bank Negara to keep the overnight policy rate at 3% in 2024 despite the outlook of interest rate cuts in major advanced economies and regional peers, which is expected to be positive for the ringgit versus the US dollar,” it said.

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