RAM Ratings expects Malaysia’s economy to grow at 4.5-5.5% in 2024

KUALA LUMPUR: RAM Rating Services Bhd (RAM Ratings) expects Malaysia’s economy to record a positive growth of 4.5 per cent to 5.5 per cent in 2024 as the labour market remains robust, powering domestic demand.

Recent data indicates tentative signs of the current electrical and electronic downturn bottoming out, potentially lifting exports next year, it said in a statement following the release of its Economic Update 2023 report.

“The resolution of labour shortage issues could provide additional impetus to the growth of laggard sectors like agriculture and construction.

“Bets are now increasingly on a soft landing for the United States economy, leading to possibly less severe global slowdown,” the rating agency said.

For the second half of 2023 (2H 2023), it anticipates economic momentum to remain challenged by soft global demand and other headwinds, with gross domestic product (GDP) likely to grow slower at 4.0 per cent to 5.0 per cent from 8.7 per cent last year.

Overall, it said GDP growth decelerated to 4.2 per cent year-on-year (y-o-y) in 1H 2023 (2H 2022: 10.4 per cent) as global trade eased off and the semiconductor downcycle bit into exports.

Exports declined 6.4 per cent y-o-y in volume in 1H 2023, with base effects knocking the figures down further.

“Domestic demand, the key driver of economic growth, was also softer at 4.5 per cent in 1H 2023 compared to 9.9 per cent in 2H 2022, as spending behaviour normalised,” it said.

The weakening momentum seen in the second quarter (2Q 2023) would likely persist for the remainder of the year as external headwinds loom large.

A spike in global food and commodity prices due to supply distortion by geopolitics and/or tariffs would be a key downside risk that could inflate domestic prices and hinder local consumption demand.

“Lacklustre global demand, aggravated in particular by China’s property crisis, could crimp Malaysia’s export growth,” added RAM Ratings. – BK