KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB Research) projects that gross domestic product (GDP) growth will normalise to 4.8 per cent year-on-year (YoY) in 2024.
This falls within the official government growth target of 4.0 to 5.0 per cent YoY and is consistent with their point estimate of 4.8 percent YoY, it said.
"Growth is expected to be driven by improvements in global trade activity, an ongoing recovery in the tourism sector, a steady labour market, and realisation of investments that have already been approved," it said in a note.
Nevertheless, the investment bank said Malaysia will also be faced with downside risks that could emanate from the escalation of geopolitical risks in the Middle East, Western area, or even the South China Sea.
In addition, it said a more entrenched inflationary environment would also have negative consequences for global monetary conditions, with central banks forced to maintain a more restrictive monetary policy environment.
"These downside risks could lead to a more volatile global financial environment and weaker economic growth.
"Notwithstanding these downside risks, we anticipate Malaysian GDP to improve in 2024 and maintain our expectation for the monetary policy committee (MPC) to maintain overnight policy rate (OPR) at three per cent in 2024," it added.
Malaysia released an advance estimate for the fourth quarter of 2023 (4Q23) on January 19, based primarily on two months of published production data (October and November) and estimates for December to estimate the GDP by production sector.
The advance estimate showed GDP improved marginally to 3.4 per cent YoY compared to 3.3 per cent YoY in 3Q23, in line with HLIB Research's original forecast but lower than the consensus estimate of 4.1 per cent YoY.
Following this, the annual GDP for 2023 reached a growth rate of 3.8 per cent year-on-year, in contrast to the 8.7 per cent growth observed in 2022.
This aligns with the forecast made by the investment bank but falls slightly below the official target of approximately four per cent year-on-year.
The actual GDP for the fourth quarter of 2023 will be released on Feb 16, 2024.
On a quarter-on-quarter basis, Malaysia's economy saw a slowdown, with a growth rate moderating to 3.5 per cent from the 5.2 per cent recorded in 3Q23.