PETALING JAYA: OCBC Bank is cautiously optimistic about Malaysia’s growth outlook for 2024, foreseeing gross domestic product (GDP) expansion at 4.2% year-on-year (y-o-y) despite challenges in export demand.
OCBC Bank chief economist Selena Ling said that export demand will be buffeted by numerous factors including slower global growth, fading commodity tailwinds, and persistent geopolitical tensions.
“The bottoming of the electronics export downcycle may provide much-needed support to export growth and to that end, we forecast goods export growth to remain negative at -1.0% y-o-y in 2024, although this is still better than in 2023. Resilient tourism inflows in 2024 will also provide some support for overall services,” she said in a media statement on OCBC Bank’s First-Half 2024 Economic Outlook today.
Despite the weak external backdrop, the bank forecast 2024 GDP growth to be resilient at 4.2% y-o-y versus the advance estimates of 3.8% in 2023 for Malaysia.
The support to growth will come mainly from domestic demand factors, namely a stabilisation in private consumption growth and higher investment spending supported by a strong medium-term reform agenda.
Ling stated private consumption growth has been volatile since the onset of the pandemic after period of relatively stable growth of 7% (2010-19).
“Anecdotal evidence suggests that household balance sheets were significantly impacted by the pandemic and that savings were drawn out.
“As the scars of the pandemic fade into 2024, we expect private consumption growth to normalise, albeit settling at a lower rate versus pre-pandemic levels,” she said.
Meanwhile, reform momentum has started to gain traction since 2H23 and this, the bank expects, will be supportive of investment spending.
She pointed to Prime Minister Datuk Seri Anwar Ibrahim and his administration which have launched numerous medium-term plans since July 2023 including the introduction of the ‘Madani Economy’, the National Energy Transition Roadmap (Part I and II), the New Industrial Masterplan 2030, the mid-term review of the 12 Malaysia Plan (MP), the Fiscal Responsibility Act and Government Procurement Act and Budget 2024.
“While many of these plans are medium-term in nature, the immediate impact will be continued fiscal consolidation and reallocation of resources towards much investment spending and infrastructure projects. The government introduced the PADU database in January 2024 as a precursor to a more targeted fuel subsidy mechanism,” she said.
