PETALING JAYA: The advance estimate for Malaysia’s first-quarter economic growth matches market forecasts of 3.9%, led by a resilient services sector and a recovery in manufacturing activity.
This puts the country on the right track to meet Bank Negara’s full-year economic growth forecast of 4% to 5% in 2024, according to analysts.
The advance estimates released by the Statistics Department compared with annual growth of 3% in the final quarter of 2023, when subdued exports weighed on growth.
The first-quarter advance estimate was based primarily on two months of published production data for January and February and estimates for March.
The actual gross domestic product (GDP) figures for the first quarter of 2024 (1Q24) will be released on May 17.
“Observing the historical trend of the Statistics Department’s initial publications on advance GDP estimates, it suggests a likelihood that the actual GDP later next month may align more closely with this lower level.
“Nevertheless, there is a possibility for positive contribution from the upcoming March data to enhance the first quarter reading,” said TA Research.
Earlier, TA Research had predicted GDP to grow by 4.3% in the first quarter.
It is noteworthy that crucial indicators such as the Distributive Trade Index, Industrial Production Index, construction statistics and the Index of Services have not been announced at the time of release of the advance estimate.
“The economic trajectory of these indicators presents a hopeful outlook for Malaysia to potentially achieve a more favourable figure in the first quarter, with the possibility of exceeding the initial projections,” the research house said.
Meanwhile, Kenanga Research said that economic growth momentum is likely to steadily pick up in the second half of 2024 (2H24).
The research house noted that while the estimate for 1Q24 GDP exceeded its in-house forecast, it has decided to maintain the overall 2024 GDP growth projection at 4.5% to 5% as downside risks remain in 1H24.
Export performance remains subdued due to China’s fragile post-pandemic recovery, while escalating geopolitical tensions, notably in the Middle East, could potentially escalate into regional conflict, adversely impacting the global supply chain and sentiment, and subsequently weighing on growth outlook, the research house said.
“This is also reflected in the latest manufacturing Purchasing Managers’ Index reading for March at 48.4 compared with 49.5 in February, which has remained in contraction since August 2022.
“Additionally, exports declined by 0.8%, matching February’s decline. Domestically, the long-awaited targeted-subsidy mechanism could also pose a threat to consumer spending given the expected rise in general prices amid higher fuel prices,” said Kenanga Research.
Hong Leong Investment Bank Research (HLIB Research) expects GDP growth to normalise upwards to 4.8% in 2024, within Bank Negara’s official target.
The research house said growth is expected to be underpinned by continued growth in private consumption and investment activity, benefitting from employment growth, wage increase and new policy options that enable withdrawals from the newly launched EPF Account 3 as well as implementation of healthy investment.
Trade activity is also expected to lift GDP growth, following the recovery in the global tech downturn and low-base effect.
“Nevertheless, downside risks remain, stemming from an escalation of geopolitical tensions, particularly in the Middle East, persistent inflationary pressures and the consequent higher-for-longer global interest rate environment.
“Notwithstanding these downside risks, we maintain our expectation for Malaysia’s GDP to improve in 2024 and for the Monetary Policy Committee to maintain the overnight policy rate at 3% in 2024,” HLIB Research said.
