KUALA LUMPUR: Bank Islam Malaysia Bhd anticipates Malaysia's gross domestic product (GDP) growth to reach 6.0 per cent in the second quarter (2Q) of 2024, which is slightly above the Department of Statistics Malaysia's (DoSM) advance estimate of 5.8 per cent.
However, the bank maintained its 2024 growth forecast at 4.7 per cent, noting the downside risks to the outlook posed by global developments.
"Overall, private consumption has been the key driver of positive growth in 2Q, supported by a stable labour market, with the unemployment rate holding steady at the pre-pandemic level of 3.3 per cent," it said in a research note.
The Malaysian economy grew by 4.2 per cent year-on-year in the first quarter of 2024, which means a 6.0 per cent expansion in 2Q would represent a growth acceleration.
Bank Islam said spending was further boosted by a rise in tourism, as the country saw 9.5 million foreign tourists in the first five months of 2024 compared to 7.5 million in the same period last year, an increase of over 25 per cent.
"Despite expectations of moderation in private consumption due to subsidy rationalisation, spending growth has been sustained by government cash transfers, withdrawals from the Employees Provident Fund Account 3, and festive demand," it said.
Bank Islam said the construction sector is expected to expand further, backed by a strong investment momentum.
"Official estimates point to another double-digit growth for 2Q 2024 at 17.2 per cent and we stand to agree that another strong performance is in store for the sector," it added.
According to DoSM, the value of work done in the construction sector surged by 20.2 per cent year-on-year in 2Q 2024 due to the realised investment projects as well as the roll-out of the multiple infrastructure development projects, including the Rapid Transit System Link between Johor Bahru and Singapore.
Investments into data centres and renewable energy infrastructures also bolstered the growth of the sector.
"Moving forward, we believe that the government's policy reforms such as the fuel subsidy rationalisation would increase the government's fiscal space, thus providing ample room for more development projects," said Bank Islam.
Looking ahead, Bank Islam said Malaysia's GDP growth is expected to remain steady but to moderate slightly in the third and fourth quarters of 2024 amid a more challenging global economic backdrop, including anticipated slowdowns in the United States (US) and China.
It added that private consumption would continue to drive growth, though sentiment may be weighed down by concerns over higher living costs.
"Trade is likely to improve further following the slump from 2Q 2023 to the first quarter of 2024, supported by a recovery in the global semiconductor market, while investment is expected to benefit from several development projects in the pipeline," Bank Islam said.
However, it noted that the outlook faces several downside risks from global developments, including the US presidential election, intensified US-China trade tensions, and escalating tensions in the Middle East.