KUALA LUMPUR: Economists believe Malaysia’s economy is on track for sustainable growth for the full year, underpinned by robust investments and improving external demand.
University of Malaya senior lecturer Dr Aidil Rizal Shahrin expects the country’s economy to grow by 5-6% in 2024.
“This is higher than the forecast of the global economy growth of 3.2% by World Economic Outlook,“ he told SunBiz.
Aidil Rizal noted that the country’s gross domestic product (GDP) growth in the third quarter of 2024 (Q3’24) was slightly lower than that in the first and second quarters, when it was 5.6% and 5.9%, respectively.
“Nevertheless, we might expect the 2024 growth to exceed the earlier forecast of around 4-5% growth,“ he said.
Aidil said that private consumption, amounting to close to 60% of GDP, became the main contributor to growth at 4.8%.
Besides consumption, Aidil Rizal noted that investments recorded positive growth of 15.3%.
“Since the pandemic, where in 2020 we recorded negative growth of 5.5%, our growth has been volatile. We recovered from the pandemic with a growth of 3.3% the following year and jumped to a very high growth of 8.9% in 2022,“ he said.
“Unfortunately, the global economic slowdown in 2023 weakened external demand and reduced our growth to around 3.6%. In 2023, our exports were 8% lower than in 2022,“ he said, adding that Malaysia being a small, open economy, external factors play an essential role in supporting economic growth.
“For 2024, we see an improvement already compared to 2023, where our trade surpassed the RM2 trillion threshold in just nine months, as reported by Miti (Ministry of Investment, Trade and Industry),“ Aidil Rizal said.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the economy should be able to settle at around 5% growth this year, which he said is decent growth.
“For now, I’m still maintaining my GDP projection of 4.9% for 2024. As for Q4, my sense is that the quarter could grow around 4.5% to 5%, taking cues from the moderation in consumer spending while investment and the external sector will continue to provide support to the economy,“ he said.
Mohd Afzanizam said that at a rate of 5.3% during the September quarter, this out-turn was very much in line with the advance estimates. “The growth trajectory was decent as it continues to hover above 5%, albeit at a slower pace compared to the previous quarter.”
He noted a deceleration in consumer spending from 6% growth in Q2 to 4.8% in Q3, while net exports contracted by 8.8% after a 3.4% expansion in the preceding quarter. “Despite that, overall growth was largely underpinned by investment activities among the private and public sectors, which saw their growth at a double-digit pace,“ he said.
Mohd Afzanizam said this and growth in public consumption indicate that consumers may have become guarded in their spending, despite the labour market remaining in full employment status.
Nonetheless, he said investment has really picked up pace and will continue to fuel the country’s growth.
Center for Market Education CEO Dr Carmelo Ferlito told SunBiz that Malaysia is on track to achieve 5% annual growth by the end of the year.
In relative terms, he said, growth will be pulled by investments, which he said are currently enjoying “very good momentum”
“Q3 growth is slightly below expectations, and this is due to a gradual slowing down of growth if we look at the data month by month,“ he said.
Ferlito highlighted Malaysia’s improved investment performance, noting that inflows had been sluggish for several years but are now experiencing positive momentum in gross fixed capital formation (private and public investments). “These are good premises for long-term sustainable growth grounded on investments rather than consumption.”
Kenanga Investment Bank Bhd economist Muhammad Saifuddin Sapuan commented that Q3’24 GDP growth met their projection and aligned with their expectation of moderate growth following a peak in Q2’24.
“This is partly because domestic demand has signalled a moderate expansion as the economy returns to normalcy.”
Muhammad Saifuddin said his firm maintains a 2024 GDP growth forecast at 5% and expects it to moderate to 4.8% in 2025.
“We anticipate a recovery in the manufacturing sector, particularly the export-oriented sector, to continue supporting our growth outlook,“ he added.
