Malaysia’s rating agency RAM Ratings in its Economic Outlook 2024 report released today, expects Malaysia’s economic momentum to steadily improve heading into next year, benefiting from a potential turnaround in external demand. Leading indicators point to signs that global trade and semiconductor demand have reached their nadir in 2023. Resilient domestic demand, supported by benign inflation and interest rates would also propel growth momentum.
The agency pencilled growth to reach 4.5%-5.5% in 2024 from an estimated 4.0% this year.
In its report, RAM said risks on the horizon for Malaysia’s growth will hinge largely on the global economy successfully achieving a ‘soft landing’ and avoiding further escalation of geopolitical conflicts. A spike in global food and commodity prices could pressure domestic demand, as will unintended price ripple effects of a poorly-executed retargeting of RON95 subsidies in 2H 2024.
On the fiscal side, RAM estimates fiscal deficit to clock in at 4.2% of GDP in 2024 (2023e: 5.0%), reflecting the fiscal consolidation path of the government. The narrower deficit will mainly be driven by a lower subsidy bill, better managing of other operating expenditures and higher tax revenue collections from an upside in economic conditions next year. With a need to fund critical development projects, government debt will remain relatively sticky at RM1.3 tril in 2024 (62.7% of GDP) and debt servicing not insignificant at 16.1% of total projected revenue in 2024 (2023e: 15.2%). Balancing between future economic growth and fiscal consolidation remains the standing order of the day.
