KUALA LUMPUR: Hong Leong Investment Bank Bhd has maintained Malaysia's 2024 gross domestic product (GDP) growth forecast at five per cent and expects it to be sustained through 2025.
HLIB said the much-anticipated Federal Reserve (Fed) pivot is likely to benefit the local stock market and the ringgit, although further gains for the currency may now occur at a more moderate pace.
"We maintain our 2024 GDP forecast at five per cent year-on-year compared to 3.6 per cent in 2023, which sits at the upper range of the official forecast of four to five per cent, reflecting the low base effect last year, external demand recovery and firm domestic demand growth.
In light of the lack of further fiscal reform updates, particularly regarding RON95, HLIB revised its 2024 consumer price index (CPI) forecast downwards from 2.6 per cent year-on-year to 1.9 per cent.
Consequently, it expects CPI to increase to 2.7 per cent in 2025, assuming some subsidy reform adjustment.
"Despite firm GDP growth and higher supply-driven inflation, we envision Bank Negara Malaysia to stay pat at its pre-pandemic rate of three per cent, for the remainder of 2024 and into 2025 due to global uncertainties," it said.
HLIB said foreign investors' underweight position on Malaysia has reached an inflection point, with further potential for capital inflows.
It expects 2025 Budget to strike a balance between fiscal consolidation (lowering the fiscal deficit target from -4.3 per cent to -3.9 per cent) and supporting growth.
The firm slightly lowered its end-2024 FTSE Bursa Malaysia KLCI target to 1,700 and introduced its 2025 target at 1,810.