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PETALING JAYA: Despite the anticipated slowdown in the global economy next year, Malaysia’s gross domestic product (GDP) is expected to remain robust, with growth likely to at the higher end of the government’s official target range of 4% to 5% in 2024.
The optimistic outlook is supported by the steady labour market improvement, electrical and electronics (E&E) sector recovery, continued tourism revival and the rollout of approved investments and government’s strategic plans under the Madani Economy, according to Hong Leong Investment Bank (HLIB) Research.
“We expect Malaysia’s GDP growth to normalise upwards to 4.8% year-on-year (y-o-y) in 2024 from the estimated 3.8% y-o-y in 2023, underpinned primarily by domestic demand,” the brokerage said in its report yesterday.
“Growth is also expected to benefit from a gradual recovery in trade activity, as global inflationary pressures continue to cool and major central banks close in on the end of their rate hiking cycles,” it added.
HLIB Research noted the progress of multi-year infrastructure projects and initiatives announced under the national masterplans as well as Budget 2024 were also anticipated to spur the investment landscape.
Malaysia’s economy, it added, might also benefit from China’s recovery as the latter’s government support measures begin to stabilise the world’s second-largest economy.
Similarly, Maybank Investment Bank (Maybank IB) Research said Malaysia’s GDP growth was expected to be firmer in the year ahead despite the outlook of slower global economic growth.
The brokerage projected a pick-up in Malaysia’s GDP growth to 4.4% in 2024 from the estimated 3.9% in 2023.
This would likely be underpinned by resilient consumer spending, higher government consumption and private investment, plus recoveries in trade-related services and manufacturing industries, namely tourism and electronics, it said.
Both Maybank IB Research and HLIB Research expected Bank Negara to keep the overnight policy rate (OPR) unchanged at 3% through 2024, given the upside risk to inflation amid subsidy reforms.
“Political will is key for restructuring and reforms, especially on fuel subsidy rationalisation.
“The next general election in four years’ time, sub-2% monthly inflation rate currently and Fiscal Responsibility Act’s fiscal targets are the ‘carrots and sticks’ to execute and implement,” Maybank IB Research said.
“The exact details on timing and mechanics of targeted fuel subsidy rationalisation are still pending but we need to see strict enforcement to address serious diesel subsidy leakage; a rollout of the central database hub to ‘means-testing’ eligibility for targeted RON95 subsidy; and gradual adjustments in fuel prices to mitigate impact on inflation,” it added.
Maybank IB Research projected inflation to accelerate to 3% in 2024 from 2.6% in 2023.
HLIB Research’s projected 2024 inflation stood at 2.6%, up from the estimated 2.5% in 2023, noting that further upside would be dependent on the timing of subsidy reforms, which would likely be back-loaded into the second half of 2024.
Given the positive economic outlook, HLIB Research projected FBM KLCI’s core earnings growth to regain traction at 8.2% in 2024, as compared to a flattish growth of minus 0.3% in 2023.
Taking a modest upside bias view to the market, HLIB Research pegged its FBM KLCI end-2024 target at 1,550, based on 15.2 times the estimated 2024 earnings.
“Themes that we like for 2024 are continued robust recovery in tourists to Malaysia; energy transition under the National Energy Transition Roadmap and reinvigoration of developments in Johor,” it said.
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