Considering external headwinds and tightening monetary policy in many economies, reports by MIDF Investment foresee Malaysia’s GDP growth to moderate to +4.2% for next year. The softening growth is mainly due to a deceleration in external
trade performance as slower global demand is highly anticipated. The normalised GDP growth next year is also attributable
to the absence of a low base effect, which also boosted growth this year. On the other hand, the research house is optimistic that the domestic economy to be fueled by continuous upbeat consumer spending, further improvement in tourism-related activities, and revival of infra projects.
Supply-push inflation factors to soften next year. Moving into 2023, supply-push factors on inflation are expected to
soften among others underpinned by the appreciation of USDMYR, moderation in food prices, further easing in global supply
chain pressure and relatively lower commodity prices. However, Malaysia’s inflation outlook remains cloudy for next year,
awaiting the post-GE15 government’s approach to the fuel-subsidy mechanism. If the new Government keeps the status quo on the fuel subsidy, hence headline inflation is expected to hover between +2.3~2.5% for 2023. If the subsidy mechanism is abolished entirely, headline inflation could touch +10%, while a gradual increase in domestic retail fuel prices would result in +4~5% for next year.
The research house forecasts private consumption to expand by +6.6% in 2023. Malaysia’s consumer spending is expanding strongly as reflected in retail trade sales growth of +23.2%yoy in 8MCY22. Underpinned by positive real wage growth, improving labour market, stable inflationary pressure, and fiscal incentives, private consumption is projected to grow by +6.6% for
- MIDF also believes the pent-up demand will continue provided that no significant change in overall inflationary pressure could erode purchasing power. With the reopening of international borders, tourism activity will improve modestly yet still
below pre-pandemic levels. Consumer spending in Malaysia is to stay steady amid stable inflation and the jobless rate is set to decline further to 3.5% next year, among others thanks to sustained economic recovery in a post-pandemic period as well as the return of non-citizen workers to Malaysia’s job market. - In addition, it anticipates that BNM’s OPR will be fully normalised at 3.00% in the early part of 2023, creating a monetary space for the central bank in the event of worse-than-expected global economic slowdown.
