PETALING JAYA: The Socio-Economic Research Centre (SERC) expects a positive outlook for Malaysian exports this year, mainly driven by a recovery in the demand for electrical and electronics products as well as firming commodity and crude oil prices.
After shrinking by 8% in 2023, the think-tank projected exports to grow by 4% in 2024. This is, however, one percentage point lower than Bank Negara’s forecast of 5%.
In its latest Quarterly Economy Tracker report, SERC said Malaysia’s exports had witnessed a rebound from their slow pace in the second half of 2023 (2H23), which saw a decline of 15.2% in the third quarter of 2023 (3Q23) and 6.9% in 4Q23, to an 8.7% year-on-year growth in January 2024.
SERC said the growth was partly attributable to the front-loading shipment of exports ahead of the shorter working days in February. This caused exports to decline marginally by 0.8% in February and 0.8% in March. Cumulatively, exports increased by 2.2% year-on-year in 1Q24.
Meanwhile, SERC said imports serve as a leading indicator of the economy in terms of production, investment and consumption. “The expansion of intermediate and capital goods presages continued growth in production, exports and investment activities,” it added.
Imports were noted to have grown by 13.1% in 1Q24, with consumption goods continuing to be a major contributor to household spending, coming in at 14.6% during the same period.
However, despite the recovery in external demand supporting the economy, SERC takes a cautious view on private consumption growth, which is estimated to be 4.6% in 2024 as compared to 4.7% in 2023.
With the ongoing high cost of living, rising food and beverage prices, higher service tax rates and new tax provisions, the impact of the weakening ringgit and the planned fuel subsidy rationalisation, SERC forecasts consumers will be more frugal with their discretionary spending.
“Nevertheless, stable employment growth and moderate wage expansion as well as the introduction of the Flexible Account (Account 3) of the Employees Provident Fund in May 2024 will support consumer spending,” it said.
Additionally, SERC believes the continued cash assistance, Rahmah Cash Contribution, of RM10bil will mitigate the targeted households and individuals against the high cost of living.
It is also of the opinion that catalysts for private investment growth should be sustained as it expects private investments to expand by 5.5% in 2024.
The growth is expected to be underpinned by the ongoing implementation of multi-year infrastructure projects and continued capacity expansions, as well as the realisation of several approved investments.
Nonetheless, SERC cautions that the increasing business operating costs and high cost of raw materials may dampen spending by small and medium enterprises.
Headline inflation has been moderating since April 2023, bringing the average to 2.5% in 2023. However, SERC expects the inflation to rise to 2.8% to 3.5% in 2024.
Hence, it calls on the government to remain committed towards undertaking structural institutional and economic reforms to strengthen fiscal position and contain debt levels to boost the nation’s productivity and competitiveness.
SERC said the Malaysian economy is moving positively in 2024 amid downside risk.
