MIDF in its monthly economic outlook, pointed to a slowing growth momentum as LI fell sharper, the Leading Index (LI) suggests growth momentum for Malaysia’s economy will slow in the near term as the index fell sharper by -2.7%yoy in Apr-23 (Mar-23: – 1.2%yoy) because all LI components declined except an uptick in approved housing units.
Meanwhile, it said the current economic condition remained on moderating trend although the level of activities remained above a year ago as the expansion in Coincident Index (CI), mainly supported by the growing retail trade volume. The house maintains its view that growth will be more moderate in the latter part of the year vis-à-vis the robust +5.6%yoy expansion in 1QCY23. Despite subdued demand on the external front in recent months, the sustained growth in domestic spending supports the view that the continued expansion in domestic demand will be the key driver to support Malaysia’s growth this year.
As such, MIDF said it will maintain its forecast for GDP growth at +4.2% for this year, despite the stronger-than-expected growth in 1QCY23, it views the slowdown in external demand to be a drag to growth this year. On that note, it also foresees the resilience in domestic demand, particularly consumer spending, on the back of positive job market conditions will be the main driver for Malaysia’s economic growth this year.
While local businesses will grow their production amid improved supply conditions and the services sector, in particular, will gain from increased tourist arrivals, the manufacturing industry, on the other hand, will be bogged down by the softer external demand particularly influenced by the weakness in global manufacturing activity. Other factors that could derail the growth outlook include a deterioration in geopolitical and trade tensions, elevated global inflation, and therefore further tightening by major central banks which could lead to a sharper slowdown in final demand.
