Research houses remain optimistic about Malaysia’s GDP growth this year

KUALA LUMPUR — Research firms are maintaining their forecasts on Malaysia’s gross domestic product (GDP) growth at 4.2-4.8 per cent this year.

OCBC projects a GDP growth of 4.2 per cent this year, up from 3.6 per cent in 2023.

According to OCBC senior ASEAN economist Lavanya Venkateswaran, this forecast is based on improved electronics export growth, a continued emphasis on public infrastructure development and increased private sector investment spurred by the government’s ongoing reform agenda.

“The first quarter of 2024 (1Q 2024) showed a GDP growth of 4.2 per cent, and the incoming activity data for 2Q 2024, including export and import growth and industrial production, align with our full-year GDP growth forecast,” she told Bernama.

Commenting on the trade performance in May 2024, Lavanya described the May trade data as strong.

She noted that export growth is maintaining its momentum and becoming more diverse while the sustained strength in import growth highlights the resilience of domestic demand.

“Significantly, the large trade surplus bolstered the current account surplus, helping to mitigate some external vulnerabilities,” she added.

Furthermore, she noted that the drivers of export growth are becoming more diversified.

The pick-up in electrical and electronics (E&E) exports by 7.6 per cent year-on-year (y-o-y) from 0.6 per cent in April suggests that the bottoming of the global electronics export downcycle is starting to reflect on Malaysia’s E&E exports.

Other manufactured goods exports such as machinery and appliances, optical and scientific equipment were also strong in May versus April.

Commodity exports including crude petroleum and petroleum products, LNG were the drags on May export growth even as palm oil exports held up well, she said.

She said Malaysia has witnessed a notable increase in the demand for its E&E and palm oil exports, driven by several key factors within the ASEAN, United States, and China markets.

Firstly, the recovery in the global electronics export cycle has significantly boosted Malaysia’s E&E exports to the US and ASEAN countries as this uptick indicates a resurgence in the global demand for electronic goods, which has had a positive impact on Malaysia’s export sector.

Secondly, robust economic activity in many ASEAN countries and the US has played a crucial role.

“Sustained consumption and investment demand in these regions have led to an increased need for related products, thereby enhancing Malaysia’s export growth. The strong performance of these economies has provided a stable and growing market for Malaysia’s exports,” she said.

According to the Ministry of Investment, Trade and Industry (MITI), Malaysia’s trade remained resilient and buoyant in May 2024, recording a double-digit y-o-y growth of 10.3 per cent to RM246.31 billion — the highest value recorded since October 2022 and the fifth consecutive month of y-o-y expansion.

Exports increased for the second consecutive month, expanding by 7.3 per cent to RM128.22 billion, imports grew by 13.8 per cent to RM118.09 billion, resulting in a trade surplus of RM10.14 billion and the 49th consecutive month of surplus since May 2020.

Hong Leong Investment Bank Bhd expects Malaysia’s export performance to gradually strengthen in the second half of 2024 (2H 2024) as global demand for E&E products continues to improve, reflected by the positive momentum in global semiconductor sales (May: +15.8 per cent year-on-year).

“Over the longer run, the recently launched National Semiconductor Strategy and its aim to guide the industry up the value chain are also expected to lend support to Malaysia’s E&E exports.

“We maintain our 2024 GDP forecast at 4.8 per cent y-o-y (2023: 3.6 per cent y-o-y),” the research firm said.

Meanwhile, Kenanga Research continues to expect further export increases in the coming months, driven by the technology upcycle and China’s gradual economic recovery.

It said this growth will likely be supported by strong demand from regional economies and potentially better-than-expected performance from advanced economies as global central banks may lean towards monetary policy easing to support domestic demand.

However, the research firm said downside risks persist due to global economic uncertainty and the potential impact of escalating geopolitical tensions, including the Red Sea crisis and renewed US-China tensions.

With that said, it maintained the 2024 GDP growth forecast of 4.5 per cent to 5.0 per cent with the anticipation of steadier growth momentum in 2H 2024.

“Domestic growth will be supported by the ongoing recovery in the export-oriented manufacturing sector, alongside solid domestic demand momentum.

“This is mainly thanks to a stable labour market condition due to robust hiring activities, continued increase in tourist arrivals and spending as well as the ongoing government policy support and positive investment trends,” Kenanga Research said. — BERNAMA