Malaysian economy in good stead to weather choppy 2023 

RAM Ratings, which projected Malaysia’s GDP growth to slow to 4%-5% in 2023 from an estimated 8.2% in 2022, expects Malaysia’s broad and diversified base to cushion intensified headwinds to growth next year.

In its Economic Outlook 2023 report released today, it said the global economic slowdown is anticipated to dampen Malaysia’s exports while the still notable price pressures and tighter monetary conditions may impact domestic consumption.

That said, Ram Ratings reckons that domestic demand is expected to drive the economy as businesses and households climb out of the lingering shadows of the Covid-19 pandemic.

“Growth will be supported by stronger labour market conditions next year, with the average unemployment rate projected to fall to 3.5% (2022e: 3.8%). The resolution of issues related to foreign workers and supply chains should also provide additional impetus for growth,” it remarked.

However, it cautioned that sharper than expected deterioration in the global economy as well as domestic inflation are key downside risks for next year.

On the fiscal side, it noted that the more moderate commodity price levels and in turn the related subsidy expenditure may keep the fiscal deficit contained within 5.4% of GDP compared to 5.8% in 2022.

RAM Ratings did however note that the estimate is still subject to the final formulation of subsidy rationalisation plans for key items including petrol and electricity tariffs.

“With the status quo, the current fiscal space remains fairly tight, with government debt projected to reach RM1.1 trillion in 2023 (62.4% of GDP) and debt servicing at a significant 16.9% of total projected revenues for 2023 (2022e: 15.1%),” it said.