HSBC forecasts Malaysia's 2024 GDP at 4.5%

KUALA LUMPUR: HSBC has forecast Malaysia’s gross domestic product (GDP) growth at 4.5 per cent for 2024, slightly above consensus with an upside risk.

Its co-head of Global Research Asia and chief Asia economist, Frederic Neumann, said the forecast was supported by the country’s robust economic performance and the incoming inflows of foreign investments.

"We also expect a pickup in trade over the second half (2H) of this year, benefitting mainly from consumer electronics,” he said in the HSBC 2H 2024 Asian Outlook webinar today.

Neumann said Southeast Asian countries, including Malaysia, have continued to perform well in their economies, with no sign of financial stress despite rising interest rates.

He also noted that Malaysia’s exports were doing quite well, which was surprising given the global backdrop of weaker growth.

"Besides, the GDP forecast will also be bolstered by the gradual turnaround in the trade cycle and an additional boost from the tourism sector.

"With the global demand from consumers for electronics accelerating notably, this should also help countries in ASEAN, particularly Malaysia and Vietnam. We remain quite positive on trade going forward,” he said.

HSBC has forecast Asia’s economy to grow 4.9 per cent for the full year of 2024.

Neumann said HSBC believes that the US Federal Reserve (Fed) cutting interest rate will occur this September, which will be a shallow easing cycle for most central banks in the region.

It also maintained its view that BNM is likely to hold its policy rate at 3.0 per cent in 2024, and recently, it removed its call of a 25 basis point rate cut in the first quarter (1Q) of 2025.

"For Malaysia, the possibility of a rate hike is higher than a rate cut, although neither is our central case,” he said.

Ringgit an outperformer

Meanwhile, HSBC head of Asian FX Research Joey Chew said the ringgit has been an outperformer and has been trading stable since February this year, although other Asian currencies continue to weaken against the US dollar.

"Something that may help the ringgit later is the ongoing change to the fuel subsidy programme. This is important for fiscal sustainability.

"For the ringgit too, there could be a direct impact if higher prices help to curb consumption. Malaysia’s trade deficit in petroleum products is now at an all-time high,” she said, adding that the ringgit is forecast to be at 4.68 for year-end.

Currently, the ringgit is trading around 4.67 to 4.68 against the greenback.

Meanwhile, HSBC’s head of equity strategy, Asia Pacific, Herald van der Linde, said the Malaysian stock market has also performed better than initially anticipated.

"To a larger extent, the story of Malaysia is the new supply chain that is being built up and the data centres being developed. So we are seeing strong performance for the utility stocks,” he said.

Van der Linde said Malaysia is well positioned to benefit from the rise in data centres amid increased demand for cloud and artificial intelligence (AI) services, as large tech giants already invest heavily in the market.

"Overall, this means that Malaysia’s performance has been quite specific to certain sectors, such as small-cap and semiconductor segments. To us, it is an alright market,” he said.

Van der Linde added that HSBC forecasts the FBM KLCI to be at the 1,680 level by the end of 2024. - Bernama