KUALA LUMPUR: HSBC Malaysia anticipates the local electrical and electronics (E&E), domestic consumption and tourism sectors to drive the local economy’s gross domestic product (GDP) to grow to 4.5%, higher compared with 2023.
Global private banking and wealth (Southeast Asia and India) chief investment officer James Cheo (pic) reckoned that Malaysia’s GDP grew to around 3.8% last year and expects the growth momentum to continue this year.
He said the local economy is expected to remain healthy in 2024, underpinned by resilient consumer and investment spending. At the same time, he also said that the positive fillip for the economy will come from the nascent recovery of the global electronic cycle and the resumption of global tourism travel.
“The external environment looks a little bit better, there’s improvement in the global electronics cycle ... the pick up in electronic cycles is still in early days. Nevertheless, I think that will play out in 2024, it will benefit Malaysia, (driving its) electronic exports.
“Domestic consumption is always quite strong in Malaysia, that's always a pillar of growth, it will continue to be robust. With inflation starting to stabilise, hopefully it will put more money in the hands of consumers to spend more,” Cheo said during HSBC’s wealth and investment outlook briefing for the first half of 2004 yesterday.
He added that the Malaysian tourism sector would likely expand this year. In Asean, he reckoned that compared with other countries within the region, Malaysia is “capturing the lion’s share, in terms of tourists, especially from China, which is actually very positive”.
“While we might not see that recovery of Chinese tourists pre-pandemic, but it will still be an improvement compared to last year. Putting all these together, we expect Malaysia to grow by about 4.5% which is respectable and quite solid .... from that perspective, its going to be positive,” said Cheo.
Furthermore, HSBC expects Bank Negara Malaysia to keep its policy rate at 3% for the rest of the year.
“We forecast the ringgit to stay stable at RM4.55 against the US dollar by the end of 2024,” he said.
On supply chain reconfiguration, Cheo said geopolitical tensions, trade fragmentation and technology restrictions are accelerating global supply chain diversification across the region.
In order to mitigate geopolitical risks and alleviate the impact of trade tariffs, western multinational corporates have implemented the “China+1 strategy” by building new production facilities in India and Asean to supplement their supply chain in China, he said.
“The whole trend of supply chain reorientation works very well for Malaysia as global investors or global multinationals start to think about the entire Asean as a whole consumer market. Ultimately, the Asean economies are linked together to the Regional Comprehensive Economic Partnership.
“Malaysia has (various) strengths, such as its semiconductor production and commodities markets. So there is a fairly strong proposition, as investors consider investing in Malaysia. Overall, it should be a good year for the Malaysian economy,” Cheo said.
He said HSBC it sees promising secular growth opportunities in India and Asean, driven by structural tailwinds from strong foreign and domestic private investments, young demographics, technology boom and green transformation.
“India has consistently delivered stronger-than-expected growth in manufacturing and service activities throughout 2023, with strong foreign direct investment inflows and booming services exports powering employment, private consumption and productivity gains.
“Forty per cent of the world’s global capability centres are in India, offering a strong boost to the country’s service exports and the job market,” he added.
Cheo said Indonesia offers solid growth and is one of the more favourable investment stories in Asia, supported by its large, young and growing population with rapid urbanisation as well as robust private consumption as its key growth engine.
”Indonesia further benefits from upgrading of its manufacturing value chain. The country’s abundant reserves of green minerals and metals are vital inputs for the electrical vehicle and battery industries,” he added.
