PETALING JAYA: Prime Minister Datuk Seri Anwar Ibrahim and his Cabinet should find it easier to roll out reforms this year after the Malaysian economy outperformed analysts’ growth forecasts in the first quarter.
Supported by the country’s “healthy” growth momentum, reform initiatives such as fuel subsidy rationalisation would likely proceed as planned, said CGS International Research (CGSI Research) economists Nazmi Idrus and Mas Aida Che Mansor.
Currently, there is not enough clarity on when the fuel subsidy will be cut or what the new petrol and diesel prices will be.
However, unsubsidised RON95 petrol is now sold in Perlis for foreigners at RM3.35 per litre as of May 20, in comparison to the subsidised price of RM2.05.
If that is used as a benchmark, Malaysians who do not qualify for fuel subsidies will have to fork out about 63% or RM1.30 more for a litre of petrol. For a Proton Saga 2024 with a 40-litre tank capacity, that would mean an extra RM52 for each full tank refill.
The Malaysian gross domestic product (GDP) grew by 4.2% year-on-year (y-o-y) in the first quarter of 2024 (1Q24), surpassing Bloomberg consensus median forecast of 3.9% and the Statistics Department ‘s advance GDP estimate of 3.9%.
Seasonally adjusted quarter-on-quarter GDP growth also rebounded to 1.4%, as compared to a contraction of 1% in 4Q23.
The strong GDP print was achieved on resilient domestic demand, driven by sustained private spending during the festive season and continued government expenditure, partially offsets the contraction in net exports.
Following the first-quarter performance, Maybank Investment Bank (IB) Research raised the GDP forecast for 2024 to 4.7% from 4.4%. As for 2025, the forecast was raised to 5.1% from 5%.
“Key revisions are in the projections for gross fixed capital formation on stronger private investment and public investments that feed into upgrades in growth forecasts for construction and imports of goods and services,” it said in a note.
Meanwhile, TA Research said it anticipates “even more promising signs of economic growth” in the second quarter, with expectations of reaching as high as 5.5% y-o-y.
The research house also projected a GDP growth rate of 4.7% for full-year 2024, which is in line with the government’s forecast of 4% to 5%.
“On the external front, we anticipate a steady improvement in Malaysia’s trade momentum this year.
“A potential upswing in external demand, particularly from China – our primary export market – adds a promising dimension to the economic landscape,” it said, pointing out that China contributes about 12.3% of Malaysia’s total exports.
In addition, CGSI Research opined that the macroeconomic indicators are improving.
“The trend in loan growth, retail sales and trade side are improving while a further catalyst for a greater rise in consumer expenditure may come from the implementation of the Employees Provident Fund’s Flexi Account.
“In terms of investment activity, ongoing advancement of multi-year infrastructure projects and execution of catalyst projects in accordance with the national masterplan will continue to support domestic economic activity.
“On trade, we anticipate Malaysia’s exports to progressively increase for the rest of 2024 amid better international trade conditions and improved demand for electrical and electronic products.”
However, CGSI Research cautioned that downside risks could emerge from the latest US-China trade tensions following the imposition of tariffs by the United States on Chinese products.
“We think it is too early to determine if this tussle will have beneficial impacts on any regional economies. We maintain our GDP of 4.6% y-o-y in 2024,” it said.
In a separate note, UOB Global Economics & Markets Research said the potential impact of Malaysia’s subsidy rationalisation, escalation in geopolitical risks and slower-than-expected global economic landscape are wildcards for Malaysia’s near-term growth prospects.
“With a balance of risks between domestic growth and inflation, our forecast for the overnight policy rate is kept unchanged at 3% through 2024.
“Furthermore, the Monetary Policy Committee (MPC) did not signal any potential changes to its monetary policy settings during last week’s (May 8-9) meeting,” it said.
The MPC will meet again on July 10-11.
UOB Global Economics & Markets Research has maintained its 2024 GDP forecast at 4.6%, higher than 2023’s actual growth of 3.7%.
