PETALING JAYA: The country’s eyes will be refocusing on fresh gross domestic product (GDP) numbers for the first quarter of 2024 (1Q24), especially in view of the moderating pace at the end of last year.
Bank Negara, together with the Statistics Department, will publish 1Q24 GDP data tomorrow but early speculation from the market is expecting growth for the first three months of the year to hover around 4% on improving external prospects that is set to be the tone for 2024.
Sunway University economics professor Yeah Kim Leng is estimating Malaysia’s 1Q24 GDP growth to be at 4.3%, premised on the sectoral performances announced by the Statistics Department for the quarter in review.
“This exceeds the flash estimate of 3.9% and last year’s 3.7%, further affirming the economic recovery and strengthening growth this year,” he said.
He said the stronger-than-expected growth in 1Q24 suggests that the economy is on track to achieve full-year GDP growth of 4% to 5%, with an increased likelihood of hitting the upper half of the expected range, especially if external demand picks up more strongly in the coming quarters.
Yeah, who is also a member of the Prime Minister’s Policy Advisory Committee, however observed that external demand recovery in 1Q24 has been less robust than expected, as reflected by the almost 2% year-on-year (y-o-y) decline in export volume.
Nevertheless, he pointed out that the export contraction was offset by a 4.2% rise in export unit value largely due to the weaker ringgit.
“Despite increased vulnerabilities in the global economy, the baseline scenario of the United States achieving a soft landing together with a sustained recovery in the Chinese economy remains unchanged,” he said.
Of note, he mentioned that together with sustained private consumption and improving investments led by the entry of foreign funds, the external demand recovery could elevate Malaysia’s GDP growth closer to 5% this year.
Economist Prof Geoffrey Williams said if the GDP growth estimates are correct at 3.9% for 1Q24, which is below the expected growth of 4% to 5% for the whole of 2024 and lower than 5.6% in 1Q23, there will need to be extra growth in the remainder of the year.
“This could rely on a push to consumer expenditure from the Employees Provident Fund withdrawals from the new Flexible Account and government spending. In a sense, we will be buying growth from savers and taxpayers,” he opined.
Williams expects 1Q24 GDP to be around or slightly below 4%, in accordance with consensus’ forecast, but acknowledged that the prediction could be revised upwards.
He told StarBiz that domestic economic conditions as well as global headwinds are similar to those of last year, and Malaysia will in part be affected by US growth and interest rates as well as regional issues, especially China’s economy.
As such, he is projecting Malaysia’s GDP to grow by 3% to 4% for the whole of 2024.
Expounding on the influence of external factors, Sunway University’s Yeah is convinced that the monetary policy of the US Federal Reserve (Fed) will continue to have more of a bearing on Malaysia’s economy than other geopolitical issues.
He said the persistent global conflicts have not had a major impact on the Malaysian and Asian economies, as global supply chains have not been impacted severely except for the diversion of shipping routes away from the Suez Canal.
This is provided the armed conflicts in Ukraine and Gaza do not escalate, as they would otherwise ratchet up uncertainties and investors’ risk aversion, constituting a major downside risk to trade-dependent economies including Malaysia, he said.
“On the other hand, the high US interest rates and stronger US dollar have been the bane of most economies as currency slides and fluctuations have had a destabilising effect on trade and investment. They are also disruptive in raising imported prices and causing inflation to rise,” he said.While the Fed has telegraphed three rate cuts this year, Yeah said the timing has remained uncertain, being dependent on the inflation trajectory, job market performance and overall state of the United States economy.
Considering both domestic and international factors, he is forecasting a full year GDP growth of 4.8% for Malaysia.
“The upward shift within the expected 4% to 5% range is premised on sustained domestic demand, particularly stronger foreign-led investment, and improving global demand on account of sustained recovery in the Chinese economy and the United States economy achieving a soft landing,” he added.
In resonance with other economic experts, HSBC Asean economist Yun Liu is also seeing an improvement in external demand to be the main driver of the country’s economic growth this year, despite notably mentioning that the country has not seen a meaningful recovery in the electronics cycle. “This is because Malaysia does not have a direct exposure to artificial intelligence-powered chips. That said, we expect the tech cycle to broaden out, boosting growth more in the second half of the year,” she said.