Hong Leong Investment Bank Bhd (HLIB) has proposed its preliminary 2024 gross domestic product (GDP) growth forecast on Malaysia’s economy at 4.8 per cent year-on-year while maintaining the 3.8 per cent target for 2023.
“Although we forecast subpar 2023 GDP at 3.8 per cent, which is below the official target of 4.0-5.0 per cent, we expect this to regain momentum in 2024 at 4.8 per cent.
“On the back of better growth, we envision the overnight policy rate (OPR) to further normalise upwards to 3.25 per cent in 2024 from 3.0 per cent in 2023,” the investment bank said in a note today.
HLIB said that while it envisioned Bank Negara Malaysia to stay pat for the remainder of 2023, the OPR is projected to further normalise upwards to 3.25 per cent in 2024, following expectations of better growth momentum.
It also expects the consumer price index to moderate to 2.8 per cent in 2023 from 3.3 per cent in 2022 and to ease further to 2.5 per cent in 2024 — pencilled in small subsidy rationalisation impact.
Commenting on Budget 2024, HLIB projected Malaysia’s fiscal deficit to consolidate further to 4.1 per cent of GDP in 2024, supported by a pickup in GDP and an absence of 1Malaysia Development Bhd bond repayment (2023: US$3 billion)(US$1=RM4.70).
“The government is expected to advance its targeted subsidy rationalisation plans, which we think will focus on electricity and diesel — potentially saving between RM20 billion and RM25 billion or 1.1-1.3 per cent of GDP.
“In this regard, the government will leverage its central database system (Padu), likely to be ready in January 2024, which will be used as a central reference for assistance targeting,” it said.
HLIB reckoned that the goods and services tax is unlikely to feature in Budget 2024, given cost of living concerns.
Nevertheless, an expansion in revenue collection in 2024 is still expected via the capital gains tax on unlisted shares and digitalisation to enhance tax compliance, it added.
