4-5% GDP growth still attainable for 2023 despite lower 3Q growth — economist

KUALA LUMPUR: Interpacific Asset Management viewed the four to five per cent gross domestic product (GDP) target as remaining intact buoyed by the much better progress from the global front, especially in China, which could continue giving domino effect to Malaysia despite the slightly lower third-quarter (3Q) economic growth forecast for this year.

Chief economist and fund manager Datuk Dr Nazri Khan Adam Khan the target is within the range of Bank Negara Malaysia (BNM) target and is still attainable despite Malaysia’s GDP growth forecast of 2.9 per cent for the third quarter 2023.

“Of course, at the same time, Malaysia has to improve its tax collection, reduce blanket subsidies and provide adequate targeted subsidies as announced in the Budget 2024.

“With this in place, we can see Malaysia move towards the higher end of the range or achieve the five per cent target,” he told BK.

The Department of Statistics Malaysia projected Malaysia’s GDP in the third quarter of 2023 to grow by 3.3 per cent.

The central bank is scheduled to announce the official 3Q23 GDP growth on November 10, 2023.

Nazri Khan, who rebranded himself as DDNK, said the Madani Government 2024 Budget tabled last month, being the largest in Malaysian history at RM393.8 billion, would help the nation recover from the current economic predicament and, at the same time, continuously take care of the well being of the people.

Additionally, he said the introduction of targeted subsidies would help the rakyat that needed the most while helping the government to manage the deficits.

Asked if Malaysia has the potential of becoming a “welfare nation” if the government continues giving financial assistance to the rakyat, he said: “Targeted subsidies should be the answer.”

He said Malaysia should not be a welfare nation for the overly rich community but the country should look into the middle-income earners, especially those living in big cities.

“However, at this juncture, we’re not certain on the mechanism but it must be mobilised soon rather than later.

“Having a reduced subsidy burden will also help the government deploy higher budgets on other things for example hospitals, schools, et cetera,” he said.

It is worth noting that Malaysia’s RON95 fuel of RM2.05 per litre is among the cheapest in the world, cheaper than major oil producer Saudi Arabia’s RM2.94 per litre, Indonesia’s RM4.45 per litre and Thailand’s RM5.99 per litre.

Nazri Khan said there must be strong control and enforcement from government agencies, especially on controlled items for example packet oil and RON95 petrol, as this would deter people who are not eligible for the subsidies from obtaining them easily.

He said the government should look into a holistic way of determining the targeted people by using EPF data on employee contributions and other means so that it could be channelled correctly.

On the government ending chicken subsidies and price controls effective Nov 1, Nazri Khan said the government should focus on looking into ways to reduce the import goods inflation, especially the food segment, which in turn would also help reduce the inflation.

Nevertheless, he said Malaysia’s current inflation is still well within expectations and he does not foresee a surge in inflation.

On Monday, Minister of Agriculture and Food Security Datuk Seri Mohamad Sabu said the government agreed to end chicken subsidies and price controls with effect from Wednesday (Nov 1) but would continue subsidising grade A, B and C chicken eggs according to the existing mechanism.

On the ringgit and equity market, Nazri Khan said he viewed the medium-term outlook for Bursa Malaysia equities to remain stable supported by their attractive valuations, stronger corporate earnings and improving economic conditions globally.

“The ringgit performance will continue to be challenging in 2024. The negative carry on holding the ringgit is expected to increase as the central bank falls behind the currency market and inflation curve.

“For now, we expect the ringgit to move within the 4.5-4.7 range (against US dollar) in 2024 but with more fiscal reforms from the BNM, the local note can move towards 4.4-4.5 towards the later part of 2024,” he said.

Nazri Khan said in conclusion, he hoped to see the Budget 2024 provide the much-needed impetus for the nation to recover post-pandemic.

“With the largest budget in Malaysian history, this will provide a people-centric perspective within the Madani Government and fiscal reforms will help Malaysia achieve its GDP target,” he said.

On Oct 13, Prime Minister Datuk Seri Anwar Ibrahim, who is also the Minister of Finance tabled the second Madani Budget, providing an allocation of RM393.8 billion in an effort to strengthen the national economy, accelerate the business sector and at the same time achieve a balance of fiscal support and prudent spending despite the current global challenges. – BK