RAM Rating Services Bhd (RAM Ratings) expects Malaysia’s economy to record positive growth of 4.5 percent to 5.5 percent in 2024 as the labour market remains robust, powering domestic demand.

Recent data indicates tentative signs of the current electrical and electronic downturn bottoming out, potentially lifting exports next year, it said in a statement following the release of its Economic Update 2023 report.

“The resolution of labour shortage issues could provide additional impetus to the growth of laggard sectors like agriculture and construction.

“Bets are now increasingly on a soft landing for the US economy, leading to possibly less severe global slowdown,” the rating agency said.

For the second half of 2023 (2H 2023), it anticipates economic momentum to remain challenged by soft global demand and other headwinds, with the gross domestic product (GDP) likely to grow slower at 4 percent to 5 percent from 8.7 percent last year.

Overall, it said GDP growth decelerated to 4.2 percent year-on-year in 1H 2023 (2H 2022: 10.4 percent) as global trade eased off and the semiconductor downcycles bit into exports.

Exports declined 6.4 percent year-on-year in volume in 1H 2023, with base effects knocking the figures down further.

“Domestic demand, the key driver of economic growth, was also softer at 4.5 percent in 1H 2023 compared to 9.9 percent in 2H 2022, as spending behaviour normalised,” it said.

The weakening momentum seen in the second quarter (2Q 2023) would likely persist for the remainder of the year as external headwinds loom large.

A spike in global food and commodity prices due to supply distortion by geopolitics and/or tariffs would be a key downside risk that could inflate domestic prices and hinder local consumption demand.

“Lacklustre global demand, aggravated in particular by China’s property crisis, could crimp Malaysia’s export growth,” added RAM Ratings.

- Bernama

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