KUALA LUMPUR: RAM Ratings expects Malaysia's economy to steadily improve next year with 4.5-5.5 per cent gross domestic product (GDP) growth, supported by a potential turnaround in external demand.
In its Economic Outlook 2024, the company stated that leading indicators signalled that global trade and semiconductor demand reached their nadir in 2023.
"Resilient domestic demand, supported by benign inflation and interest rates would also propel growth momentum.
"We have pencilled growth to reach 4.5 per cent- 5.5 per cent in 2024 from an estimated 4.0 per cent this year," it noted. Risks on the horizon for Malaysia's growth will hinge largely on the global economy successfully achieving a 'soft landing' and avoiding further escalation of geopolitical conflicts.
It added that a spike in global food and commodity prices could pressure domestic demand, as will unintended price ripple effects of a poorly-executed retargeting of RON95 subsidies in the second half of 2024.
On the fiscal side, RAM estimated the fiscal deficit to clock in at 4.2 per cent of GDP in 2024, reflecting the fiscal consolidation path of the government.
" The narrower deficit will mainly be driven by a lower subsidy bill, better management of other operating expenditures and higher tax revenue collections from an upside in economic conditions next year. "With a need to fund critical development projects, government debt will remain relatively sticky at RM1.3 trillion in 2024 (62.7 per cent of GDP) and debt servicing not insignificant at 16.1 per cent of total projected revenue in 2024 (2023e: 15.2 per cent). "Balancing between future economic growth and fiscal consolidation remains the standing order of the day," it stated.