GEORGE TOWN: Affin Bank Bhd expects Malaysia's gross domestic product (GDP) growth to remain healthy at five per cent this year and 5.2 per cent next year amidst the low possibility of a global recession.
Group chief economist Alan Tan Chew Leong noted that as an open economy, Malaysia is poised to benefit from improved external development, in line with the International Monetary Fund's (IMF) global growth projection of 3.2 per cent in 2024 and 3.3 per cent in 2025.
Tan said market players were concerned that 2025 would be a recession year, triggered by softer-than-expected unemployment data in the United States (US), which rose to 4.3 per cent in July from four per cent in June.
"However, the current US unemployment rate remains low compared to previous recessions. Moreover, global trade momentum is also trending higher, with the global manufacturing sector recovering, mainly driven by emerging markets.
"The key macroeconomic indicators are not pointing towards a global recession this year or next. There is only a 20 per cent probability of one occurring," he said at the Affin Treasury Interactive Workshop here today.
However, Tan warned that potential risks that could trigger recession risks include a US economic contraction and China's GDP falling below five per cent, which could bring global growth below three per cent.
He pointed out that the IMF projects the US and China, the two largest contributors to global GDP, will grow at 2.6 per cent and five per cent, respectively, this year.
On the ringgit, which has benefitted from the US Federal Reserve's (Fed) recent interest rate cut, Tan expects it to hover at the RM4.20 level against the greenback at the end of 2024.
"There is room for the ringgit to strengthen further as the Fed is not done with the recent 50 basis points cut. There may be another 50 basis points cut by year-end and more next year, which should favour the ringgit.
"Furthermore, sentiment towards the local note is improving among multinational corporations, as they observe a fundamental shift in the currency and an increase in investment activity, which we expect will continue," he said.
According to the Ministry of Investment, Trade and Industry (MITI), Malaysia's approved investment surged further to RM329.5 billion last year, and the government expects another five per cent increase in approved investment this year.
Tan added that once these approved investments materialised, it would bring more good news for Malaysia and the local note.