KUALA LUMPUR: Malaysia's gross domestic product (GDP) growth will ease to 4.0 per cent in 2023 from 8.8 per cent in 2022, Standard Chartered said.
The firm said the expected slowdown is partly due to an unfavourable base and the normalisation of post-Covid pent-up demand.
"External demand is likely to be weaker, affecting trade-related sectors. In addition, the peaking of the global electronics cycle will weigh on the electronics sector.
"Domestically, higher interest rates may dampen private investment sentiment, especially given the gloomy global outlook, while higher household debt-servicing costs may weigh on discretionary spending," it said in a note today.
Standard Chartered also projected Malaysia's headline Consumer Price Index (CPI) inflation at 3.1 per cent in 2023, moderating from 3.4 per cent in 2022, on negative base effects and lower food and energy prices in 2023.
"Our 2023 inflation forecasts assume that the fuel subsidy will be adjusted in a measured and targeted manner in the second half (2) of 2023.
"We estimate that at a Brent oil price of US$100 per barrel, and if only 20 per cent of RON95 fuel users are targeted, headline CPI would increase by just 0.9 per cent on an annual basis, or by half that amount if new prices are imposed in 2H 2023," it added.
Standard Chartered expects Bank Negara Malaysia to hike the Overnight Policy Rate (OPR) again in January by 25 basis points (bps) to 3.00 per cent before pausing in March.
After that, it expects a 25bps hike in May, assuming the government has announced some form of subsidy adjustments for 2H of 2023
"The November monetary policy statement supports our January rate-hike call. Bank Negara sees risks to the 2023 inflation outlook as tilted to the upside.
"In addition, the central bank maintained its upbeat view on domestic demand while noting that current monetary policy is accommodative and supportive of economic growth. This suggests that further tightening may be in order.
"However, Bank Negara reiterated that the monetary policy committee is not on a pre-set path.
"Importantly, it added new nuance in November, suggesting that the latest 25bps hike was preemptive.
"On balance, we see room for Bank Negara to at least reverse Covid-induced rate cuts before pausing in March to allow time for earlier tightening to take effect," it said.