LI Rebound Signals Growth Momentum To Improve: MIDF

Malaysia’s Leading index registered an increase of +0.3%yoy in Dec-23 (Nov-23: -0.1%yoy), rebounding back to growth after 9 months of contraction. The improvement was mainly supported by the rise in the number of approved housing units. From month-on-month perspective, LI also rose by +0.3%mom (Nov-23: +0.5%mom), underpinned by growth in number of approved housing units and Bursa Malaysia Industrial Index.

For the Coincident Index (CI), current economic condition continued to grow at CI grew by +2.3%yoy (Nov-23: +2.6%yoy), the 28th straight month of expansion because of increases in all CI components, excluding industrial production index. The weaker industrial production also led to CI registering the second month of sequential decline by -0.5%mom in Dec-23 (Nov-23: +0.3%mom). Overall, despite the still modest GDP growth in 4QCY23, MIDF says it foresees growth momentum would pick up in 1HCY24 in view of the better LI reading and the recent improvement in export performance.

The house is of the view that the Malaysia’s economy to grow stronger at +4.7% in 2024. As LI signals for improving growth momentum in the short run, MIDF says it maintains its projection that Malaysia’s economy will grow stronger at +4.7% this year (2023: +3.7%). The pick-up in growth will be supported by the external trade recovery, on top of the sustained growth in domestic spending. However, it is cautiously monitoring potential downside risks, such as escalation of geopolitical tensions, another round of supply (and global trade) disruptions, fluctuations in the commodity and financial markets, and the possibility of economic recession in the US, which could adversely affect Malaysia’s external demand and overall growth outlook.

On the domestic front, MIDF said it is closely monitoring the effects of the government’s policy changes on the domestic price outlook, which will hit consumer purchasing power and cost of doing business as well as the overall domestic spending activities.

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