KUALA LUMPUR: Malaysia's economy is expected to grow 4.2 per cent in 2024 powered by domestic demand.
Department of Statistics Malaysia's advance estimates suggest that Malaysia's gross domestic product grew 3.8 per cent in 2023, below Bank Negara Malaysia's projections of between 4 and 5 per cent.
OCBC Bank chief economist Selena Ling said the primary contributors to growth will be domestic demand factors, specifically the stabilisation of private consumption growth and increased investment spending, supported by a robust medium-term reform agenda.
While Malaysia's export demand is expected to face headwinds from factors like slower global growth, diminishing commodity tailwinds, and ongoing geopolitical tensions, the stabilisation of the electronics export downcycle could offer crucial support to export growth.
"As we head into 2024, we are cautiously optimistic about Malaysia's growth outlook. We forecast goods export growth to remain negative at 1.0 per cent year-on-year in 2024, although this is still better than in 2023."Additionally, resilient tourism inflows in 2024 will also provide some support for overall services," Ling added.
She observed that private consumption growth has experienced fluctuations since the beginning of the pandemic, following a period of comparatively steady growth at seven per cent from 2010 to 2019.
"Anecdotal evidence suggests that household balance sheets were significantly impacted by the pandemic and that savings were drawn out."As the scars of the pandemic fade into 2024, we expect private consumption growth to normalise, albeit settling at a lower rate versus pre-pandemic levels," she added.
Government reform initiatives which have gained momentum since the second half of 2023, is also expected to provide support for investment spending.
Since July 2023, Prime Minister Datuk Seri Anwar Ibrahim has launched numerous medium-term plans, including the introduction of the Madani Economy Framework, the National Energy Transition Roadmap (Part I and II), the New Industrial Master Plan 2030 (NIMP 2030), the mid-term review of the 12 Malaysia Plan (MP), the Fiscal Responsibility Act and Government Procurement Act and Budget 2024.
"While many of these plans are medium-term in nature, the immediate impact will be continued fiscal consolidation and reallocation of resources towards much investment spending and infrastructure projects," Ling said.
Following the implementation of the Central Database Hub (PADU) as a preliminary step toward a more focused fuel subsidy approach by the government, Ling anticipates that Brent prices will stay steady at US$80 per barrel, as opposed to the 2023 figure of US$82 per barrel.
This setup enables a degree of support for revenue collections related to commodities.
"We think this is achievable at the juncture. More fundamentally, Prime Minister Anwar Ibrahim's government is keen to attract foreign direct investment (FDI) and position Malaysia as a leader within the region."These measures will build greater economic resilience and boost investor sentiment," she added.