PETALING JAYA: Malaysia’s gross domestic product (GDP) in 2023 is projected to grow at a slower but respectable rate of 4-5% compared with 2022’s full year growth projection of 8.2%, due to impact from global growth slowdown, according to RAM Rating Services Bhd economic research head Woon Khai Jhek.
He said Malaysia’s growth in 2022 should provide a sturdy base for growth in a challenging 2023, albeit a slower one. Malaysia’s GDP year-to-date in the third quarter of 2022 expanded by 9.3% year-on-year.
“We generally expect growth to remain respectable in 2023, although it will undoubtedly be slower than this year. We feel that Malaysia cannot escape ripple effects from slower global growth. In particular, the slowdown in consumer electronics demand will impact the semiconductor sector,” said Woon during RAM’s webinar today entitled Economic Outlook 2023: Choppy Waters Ahead?.
In addition, he said South Korea and Taiwan, which are seen as leading key indicators for global electrical products and electronics (E&E) value chain have been experiencing consistent downtrend recently, in terms of new orders.
“The slower orders would mean a slight slowdown in demand globally for E&E goods. This will eventually cascade to slower order books for the other E&E producing countries along the E&E value or supply chain. In turn, Malaysia being one of the key cogs in terms of the overall global supply chain for E&E. Malaysia’s producer will likely face some slowdown moving ahead,” he said.
Woon said the broad and diversified domestic economy provides a sturdy base for continued growth.
“Private consumption will continue to be the main anchor in terms of driving Malaysia’s economic growth and there will be further recovery once the labour market continues to recover.
Further escalation of geopolitical tensions, supply chain disruptions, labour shortages and political uncertainty on the domestic front could add pressure to 2023’s growth for the country.
“Domestically, some of the key risks we are looking out for (are) the sharp rise in food prices that could impact consumer sentiment and private consumption momentum.
“Any form of prolonged labour shortages, we generally do expect labour shortages to gradually ease over next year. However if it continues to remain rather tight or rather a sticky issue, this could also put more downward pressure on the overall economy outlook in general,” he said.
He added that there will be some upside from the further recovery of some laggard sectors such as the agriculture and construction sectors, when issues such as labour shortages are gradually resolved.
Economist Intelligence Corporate Network’s (Southeast Asia) director Sumana Rajarethnam expects that the global economy will continue to face major headwinds next year, notably from the fallout from Russia’s invasion of Ukraine, global monetary tightening and an economic slowdown in China.
“The war is affecting the global economy via higher commodity prices, supply-chain disruptions and Russia’s weaponisation of energy supplies. This situation will persist throughout 2023, as the Economist Intelligence Unit (EIU) expects the war to become a protracted frontier conflict” he said.
Even as economic uncertainties and headwinds are expected to intensify next year, both believe that there are opportunities to look forward to, including the easing of China’s zero-Covid policy, moderation in global food commodity prices and broader return of international travel.
RAM Rating remains cautiously optimistic of the year ahead, with the Malaysian economy expected to continue on the path of recovery and recover lost ground incurred over the last two years.
