Maybank Investment Bank Berhad (Maybank IB) forecasts Malaysia’s economic growth to moderate to 4 per cent in 2023 from 8 per cent recorded last year. The conservative outlook is caused by moderation of domestic demand a slower rate of private consumption.
The year would substantiated by higher export growth and a positive goods and service sectors albeit it being marginal.
Maybank Investment Bank Chief Economist Suhaimi Ilias, in a meeting today (Jan 5), said there are positive indicators namely a positive manufacturing, stable monthly Gross Domestic Products (2022) and the positive Industrial Production Index which resulted in the 14.2 per cent growth rate for 3Q2022.
“Inflation, seen as a major inhibitor to economic growth, will be a main cause of this reduced moderate growth coupled with a lower global purchasing power. In many leading economies in the West, global purchasing power has slowed down in the manufacturing and trade sectors leading to stagnation and a recessionary trend over the last few months. Due to this, the growth within the ASEAN region has slowed down.
“On regional inflation, it’s expected that higher prices of goods are expected to linger across 2023 as in the U.S. where the rate is expected to peak between 5 – 5.2% this year.”
Bank Negara Malaysia possible rate Overnight Policy Rate (OPR) hike to a forecasted at 3% this year will also somewhat affect the trend of moderation and justified as to mitigate inflation and adaptive to the local wage and salary increases.
“In Malaysia, the purchasing power, especially in terms of household incomes has reduced despite the increase in wages across many sectors and any further OPR hikes higher than the 3% expected will cause the cost living to rise. Am certain the central bank and the government is well aware of this and will carry out positive efforts to reduce this impact,” said Suhaimi.
He added that it’s positive to see that the possible growth of 4% is aided by the fact that BNM’s monetary policy is not restrictive as we do not foresee any further hikes taking place after the one expected in the end of January, it’s also noted that BNM had forecasted the nations economic growth at 3% this year.
Suhaimi said there will also be a marginal increase of the Ringgit despite some draw downs of national reserves. Malaysia Tourism sector is expect to buffer any shortfall (if any) as borders have reopened and arrivals increase along with higher domestic travel numbers.
Capital expenditure has also been growing over that last 3 years and it’s expected that the trend will continue. In 2021, the expenditure eas recorded at RM309 billion and over time, investments continue to grow in the machinery and automation, ICT digitalisation as well as other sectors.
Malaysia’s growth remains positive due to the economic growth in China which reached 4% from an expected 3.3% last year. Commodity prices have been seen to have rolled over or stable signalling easing of global consumer prices.
Risks are ever present and in 2023, Malaysians have to be resilient against possible subsidy rationalisation (to be addressed in the retabling of Budget 2023 on Jan 24), impact n wages and earnings is likely to be affected in this downturn, and food protectionism measures aside from global geo political tensions, he explained.
The extent or impact of global tensions increases overall costs now relative to the Russian-Ukraine tension, the lack of the supply chain resilience and greater sustainability spending.
Malaysia has a positive outlook for 2023 as FDI have been increasing since 2021 especially in the tech, telco and automation sectors.