Malaysia's economy to grow stronger in 2024: MIDF Research

KUALA LUMPUR: Malaysia's economy will likely grow stronger at 4.7 per cent this year after a more moderate expansion of 3.7 per cent last year.

In its monthly economic review, MIDF Research noted that the expected stronger growth this year takes into account the external trade recovery.

"We foresee improvement in electronics and eletrical exports and growing external demand from major markets like China and the US," it said in a note.

However, MIDF Research said the downside risk to its growth forecast  will be coming mainly from external developments such as slower growth in China, possible recession risk in the US and disruption to global trade from geopolitical tensions. 

On the domestic front, the firm said another downside risk is the possible upward price pressures which may constrain consumer spending. 

According to MIDF Research, Malaysia's gross domestic product (GDP) growth moderated to 3.0 per cent year-on-year (yoy) in the fourth quarter (Q4) of 2023, below the firm's and market expectations as well as an advance estimate of 3.4 per cent yoy. 

For the full year, it said the economy expanded 3.7 per cent in 2023. 

"The moderation was underpinned by a continued and steeper contraction in external demand, while the sustained growth was anchored by still upbeat domestic demand conditions," it said.

Meanwhile, MIDF Research said Malaysia's current account balance remained in surplus, but the size shrank to RM0.25 billion, the smallest quarterly surplus since the balance of payments statistics started. 

In terms of percentage to GDP, the size of current account surplus also dropped to historical low of 0.1 per cent. 

"In 2023, Malaysia's current account registered the smallest yearly surplus of RM22.8 billion, with the ratio to GDP declining to a new low of 1.3 per cent. 

"This highlights the extent of weak external trade to Malaysia's economic activities last year. 

"Nevertheless, we expect the ratio of current account surplus will bounce back to around 2 per cent of GDP as we expect external trade to recover this year," it added.

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