Malaysia’s trade performance is expected to show “signs of improvement” in the second half of 2023 (2H2023), lifted by the higher demand for goods and services amid a recovery in global economic growth, RHB Research said.
For the first half, the trade performance is “expected to be softer on slower outbound shipments of manufactured and commodity-based products,” it said in a research note.
“Our cautious view on the trade outlook (for 1H2023) is mainly predicated on downside risks stemming from slower growth in advanced economies; the impact of tightening financial conditions; the projected easing in global commodity prices; and uncertainties in geopolitical tensions,” it added.
Nevertheless, for the first six months of the year, private consumption is envisaged to remain robust at 5.9% year-on-year (y-o-y) on continued strength in the labour market and household income momentum.
Labour market conditions are projected to remain healthy for the year with the unemployment rate averaging at 3.6% y-o-y, further supported by strong job creation from the services sector.
Investment spending is projected to expand by 3.6% in 1H2023, with expansion from both private and public investment, buoyed by capital spending in services and manufacturing sectors amid a continued drive for greater automation and digitalisation.
Public investment is projected to expand further amid the continuation of large-scale transport-related projects such as the East Coast Rail Link, Light Rail Transit Line 3, and the Pan Borneo Highway, the research house noted.
RHB Research has maintained its 2023 gross domestic product (GDP) growth forecast at 5.0%. For the first half, it expects the economy to expand by 4.6% and by 5.4% in the second half.
“Despite the slowdown in external demand, we think that the risks on economic growth itself are limited. The domestic economy is holding up relatively well in our assessment,” it added.
RHB is maintaining its forecast peak overnight policy rate of 3.25% versus the current 2.75%. It sees headline inflation at 3.0% and core inflation at 3.5%.
