Malaysia’s GDP growth moderated to +3.0%yoy in 4QCY23 (3QCY23: +3.3%yoy), MIDF said this came in below its and market expectations as well as an advance estimate of +3.4%yoy. For the full year, the economy expanded +3.7% in 2023. The moderation was underpinned by a continued and steeper contraction in external demand, while the sustained growth was anchored by still upbeat domestic demand conditions. Domestic demand expanded faster at +6.2%yoy in 4QCY23, mainly due to stronger investment spending. Private consumption remained expansionary, albeit moderating slightly to +4.2%yoy, backed by robust labour market conditions and moderating inflation.
Both the jobless rate and inflation marked a new post-pandemic low of 3.3% and +1.6%yoy, respectively. Additionally, gross fixed capital investment also expanded faster at +6.4%yoy largely from a significantly faster increase in public sector investment. Meanwhile, private investment continued to register encouraging growth of +4.0%yoy (3QCY23: +4.5%yoy). MIDF says it foresees investment to maintain on an expansionary trend backed by progress in various infrastructure projects on the back of still encouraging domestic economic condition. In anticipation of recovering external demand, companies might also increase spending on capital and rebuilding of inventories.
MIDF also forecasts Malaysia’s GDP growth will strengthen to +4.7% this year after the more moderate growth last year (2023: +3.7%) that was dragged by external trade performance as well as moderation in private sector spending. Understandably, the moderation in growth last year also reflected a more normalized growth with the absence of low base effect from pandemic-induced slowdown. The house postulates the stronger growth this year can be achieved taking into account the external trade recovery, as it foresees improvement in E&E exports and growing external demand from major markets like China and the US.
Moreover, the house expects economic growth this year will continue to be anchored by sustained rise in domestic spending, backed by healthy labour market, rising income and continued recovery in tourist arrivals (and spending). Nevertheless, it remains cautious that external developments like slower growth in China, possible recession risk in the US and disruption to global trade from intensified geopolitical tensions could be the downside risks to Malaysia’s growth prospects in 2024. On the domestic front, it opined that the possible upward price pressures may result in constrain consumers’ purchasing power and their spending.
