After recording almost 2-year low GDP growth in 2QCY23, Malaysia’s economy is forecasted to grow slower at +2.2%yoy in 3QCY2 due to high-base effects and external slowdown. MIDF says it foresees a stronger recovery in the final lap of 2023, harping on the better recovery in China, elevated commodity prices, and steady domestic demand.
For the full year, Malaysia’s GDP growth is forecasted to moderate to +4.2%. The softening growth is mainly due to
the contraction of external trade performances as global demand is anticipated to be slower than the previous year. Negative
effects of tightening monetary policy in major economies, weaker-than-expected China’s economic recovery, and
normalisation of commodity prices are among the downside pressures to global demand in 2023. However, Malaysia’s
external trade will continue to benefit from increased global demand for commodities especially palm oil, crude petroleum
and LNG as the prices of CPO and Brent crude oil are projected to stay elevated at RM3,800 per tonne and USD83pb for
Moving into 2024, the house expects bright prospects for external trade, as well as primary sectors given that the forecast for both commodities is RM4,200 per tonne and USD85pbd for 2024. Malaysia’s agriculture and mining sectors are projected to grow by +1.5% and +2.6% respectively for next year. Manufacturing sector growth to register a faster pace of +4.0% for 2024, among others supported by NIMP 2030 initiatives. As for 2024, MIDF views the GDP growth at +4.7%, lower than the government’s target +5.0~5.5% for 2024-2025.
Domestic demand is still the main anchor. Domestic economy to be anchored by continuous upbeat consumer
spending, busier tourism-related activities, and revival of infrastructure projects. The job market remains in good shape as
reflected in continuous positive growth in employment, the decline in unemployment, and the lower jobless rate. Thanks to the easing of the global tight supply chain and normalised commodity prices, overall inflationary pressure is trending lower than in 2022.
However, food inflation seems still stubborn as compared to non-food inflation. Private consumption and services are expected to grow by +5.3% and +6.0% respectively in 2023. As for next year, we foresee slight moderation in domestic
demand especially if the targeted fuel subsidy is roll-out. The surge in fuel inflation will lead to a higher headline inflation to above +3.0%. MIDF said it expects consumer spending power to be marginally dragged despite fiscal cash assistance to certain targeted groups. It forecasts the private consumption and services sector to increase by +5.2% and +5.6% respectively for 2024.
Referring to construction work done data, Malaysia’s building output grew at a solid pace of +8.7%yoy in 1HCY23 (2022: +8.8%). Across four components, civil engineering which contributes 37.4% of the works grew stronger by +13.7%yoy in 1HCY23 against +2.7% in 2022. Private-led projects are growing at a double-digit pace +13.9% yoy (2022: +17.6%) while government-led output growth improved to +3.1% yoy (2022: +2.2%). Public Corporation-led projects lagged behind, still in contractionary form -1.3%yoy (2022: -7.1%) amid non-residential activities.
Looking ahead, the house said it expects the construction sector to record a higher growth in 2HCY23 underpinned by expansionary fiscal policy and better-than-expected private investment. Budget 2023 allocated development expenditure (DEVEX) of RM99b and expects another RM90b allocation for Budget 2024 as guided by the recent midterm review of the 12th Malaysia Plan. Public investment is projected to continue growing above +7.3% for 2023 and +3.4% for 2024, among others attributable to the public infrastructure projects such as KVDT Phase 2, Pan-Borneo Highway, ECRL, LRT3, and RTS Link. In addition, an increase in residential, and non-residential buildings and facilities will further boost investment spending as well as the construction sector. Meanwhile, the 5G roll-out will boost growth in the civil engineering sub-sector. Also, MIDF foresees the construction sector to benefit expanding by +7.5% for this year and +5.2% for 2024
