KUALA LUMPUR: Malaysia's economic growth slowed to 3% in the fourth quarter of 2023, with exports remaining subdued over the quarter on prolonged weakness in external demand.
The country's gross domestic product (GDP) was lower than 3.3% growth registered in the previous quarter, disappointing market expectations.
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In an issued statement, Bank Negara said the country's unemployment rate declined to the pre-pandemic level of 3.3% while the labour force participation rate was at a historic high in 2023.
Meanwhile, growth in investment activity was underpinned by the progressive realisation of multi-year projects and capacity expansion by firms.
Overall, Bank Negara said growth in 2023 normalised to 3.7% following strong growth of 8.7% registered in 2022.
"Growth moderated amid a challenging external environment.
"This was due mainly to slower global trade, the global tech downcycle, geopolitical tensions and tighter monetary policies," it said.
Moving forward, Bank Negara said growth in 2024 will be driven by resilient domestic expenditure and improvement in external demand.
It said the tech upcycle combined with stronger external demand and continued improvement in the tourism sector will provide support to Malaysia's exports.
On the domestic front, Bank Negara said household spending will be supported by continued employment and wage growth.
Investment activity, meanwhile, will be underpinned by further progress of multi-year projects, by both the private and public sectors, as well as the implementation of catalytic initiatives under the various national master plans.
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On inflation, the central bank said both headline and core inflation have moderated due mainly to lower cost pressurs and stabilising demand conditions.
"In 2024, inflation is expected to remain modest, broadly reflecting stable cost and demand conditions.
"However, inflation outlook remains highly subject to changes to domestic policy on subsidies and price controls, as well as global commodity prices and financial market developments," it said.
Reviewing the balance sheet, the central bank said Malaysia's current account surplus in 2023 was sustained at 1.2% of GDP, supported by a diversified export structure across market and product.
The strength in external position is also reflected in the external debt, which declined to 68.2% of GDP in 2023 from 69% in 3Q23, and a higher net international investment position at 6.6% of GDP in 2023 as compared to 5.2% in 3Q23.
"Importantly, the external debt remains manageable given the favourable maturity and currency profiles.
"One-third of the external debt is denominated in ringgit, limiting currency risk, while around 70% of debt have medium and longer-term tenures," said Bank Negara.
