KUALA LUMPUR: Economists concur that the country's gross domestic product (GDP) outlook for the year is likely to come in at the lower end of Bank Negara Malaysia's 4 per cent to 5 per cent forecast at best, and below the range, at worse.
Economists' forecasts range from between 2.5 per cent to 4.3 per cent for 2023.
BNM and the Department of Statistics today announced that the country's second quarter GDP grew by 2.9 per cent, a two-year low, dragged by a slowdown in external demand.
Bank Muamalat Malaysia Bhd chief economist and social finance head Dr Mohd Afzanizam Abdul Rashid said the lower than expected GDP numbers clearly shows the susceptibility of the Malaysian economy to the external slowdown.
Afzanizam said the sharp fall in real exports and imports to 9.4 per cent and 9.7 per cent were the main factors for slower growth in the second quarter. "Therefore, domestic demand will be the key driver for growth in the second half of 2023 (2H2023)," he told New Straits Times.
Having said that, Afzanizam said the base for 2H2022 GDP was high as the economy was growing at 14.1 per cent in 3Q2022 and 7 per cent in 4Q2022. Given that consumers are likely to be cautious in their spending, he expects GDP might grow much slower in the 2H2023.
"In that sense, the risk that GDP could come in lower than the 4 to 5 per cent growth is quite high. "Nonetheless, the reopening of the economy which has a significant impact on the tourism related sector along with the implementation of infra projects would offset the weaknesses in the global growth." As such, we believe that the monetary policy will continue to remain accommodative. We are maintaining our call for overnight policy rate (OPR) at 3 per cent throughout the year 2023," he said.
Universiti Kuala Lumpur's Business School economic analyst Dr Aimi Zulhazmi Abdul Rashid said the domestic economy will be the key driver of the next quarters, with the realisation of the high profile foreign direct investment announced by the Ministry of Investment, Trade and Industry acting as a key catalyst. He projects GDP to grow between 3.5 per cent and 4 per cent for 2023.
Malaysia University of Science and Technology economist Dr Geoffrey Williams said growth in the second and third quarters will both be challenging because of excessive growth pushed by pre-election spending last year.
"Many of the expected drivers, such as tourist arrivals and the opening of China, have been disappointing and have not reached pre-pandemic levels yet. "Due to high inflation and stagnant wages, spending power has also been lower than expected," he said.
"So, the final figure for the year will come at the lower end of the official four to five per cent range. "However, there is an increased risk that it could be below four per cent or even as low as 2.5 per cent by the end of the year," he said. Williams said external demand may remain weak, but internal demand must be strengthened by reforms to raise incomes and reform the labor market, as well as promoting underlying market reforms to promote competition.
Meanwhile, Malaysian Institute of Economic Research (MIER) head of research Dr Shankaran Nambiar, who thinks we just might be able to reach the lower end of the 4-5 per cent GDP growth forecast said he would be concerned about GDP growth in 3Q23.
"On the plus side, we have the Madani Economy announcement, which is likely to inspire some hope," he told the New Straits Times.
On the flip side though, he said, the European Union (EU) does not hold much promise, and the developments in China are worrying, showing cracks in the Chinese economy.
Nambiar said this could affect Malaysia's export-driven sectors. He added that consumer and business sentiments for the next quarter have not been terribly optimistic.
However, he noted the Madani initiative might be a moderating influence. "I expect the quick roll-out of projects would also contribute to uplifting expectations. The government's initiatives to address the cost of living issues would similarly be helpful," he said.