Malaysia's economy in 2024 to stand pat?

As 2023 drew to a close, Malaysia looks forward to chart it's economic future in the new year.

Last year had been challenging namely from external shocks from the US and China which sent our economy on a roller coaster ride.

Fortunately for Malaysia, the robust domestic economy and private consumption absorbed the shockwaves of de-dollarisation and it's subsequent slowdown.

What are the prospects for the Malaysian economy in 2024?

For UCSI University Malaysia assistant professor finance Dr Liew Chee Yoong, Malaysia's economic outlook for 2024 is generally uncertain due to potential economic headwinds next year.

"I predict the economic growth will be between one and three per cent of which key drivers of growth in 2024 are expected to include domestic demand.

Liew added consumer spending is expected to improve slightly as they are expected to be cautious in their spending due to the uncertain economic environment and the impact of inflation.

"Businesses are also expected to take a cautious outlook due to the potential economic headwinds in 2024," told Sinar Daily.

Exports not so robust

After a record breaking performance during the pandemic, Malaysia's exports are expected to take a breather and remain in the recovery trajectory post Covid-19.

Malaysia's exports surged during the pandemic as more and more stay indoors and buy online.

And now, exports are expected to taper down and take a breather.

What are the economic challenges?

There are also some challenges that could affect Malaysia's economic growth in 2024.

First is global economic uncertainty. The global economy is facing a number of headwinds, such as the war in Ukraine, the potential for a widening of the Middle East crisis to more countries and rising interest rates.

"These headwinds could weigh on Malaysia's economic growth for 2024," said

Second is labour shortages. Malaysia has been continuously facing a shortage of skilled labour especially skilled vocational workers as well as skilled workers in the high-tech and IT sector, which could constrain economic growth.

Third is potential supply chain disruptions.

Supply chain disruptions could affect businesses and consumers especially if there are external supply shocks or disturbances which occur in other countries as a result of a crisis or conflict.

What can the government do?

The Malaysian government can take a number of steps to support economic growth in 2024.

These include investment in infrastructure projects to boost productivity and create jobs, provision of support to small and medium for small and medium scale enterprises to assist them in their growth.

There must also be promotion of innovation by investing in research and development and creating a supportive environment for start-ups.

Meanwhile, Associate Professor Aimi Zulhazmi Abdul Rashid said that global economy outlook for 2024 hopefully will turn up to be better than the year 2023.

However it very much depends on the direction of the US Federal Reserve's interest rates.

"The world anticipated that the US Fed will reduce it's interest rates gradually in 2024 in tandem with declining inflation rates hovering around 3 percent.

"Nonetheless the new economic data such as it's unemployment rates and new jobs creation have been somewhat unpredictable.

The US Fed chairman is still steadfast to achieve his earlier targeted inflation rate of two per cent, and adamant to increase the interest rates should the inflation run riot.

"Therefore, the current interest rates will remain for sometime and will either be reduced slowly if inflation declines or slashed very fast if a recession hits the US economy.

Banking on the US economy

The direction of the US economy is seen as paramount and influential as it constitutes 25 per cent of global gross domestic product GDP.

"Should the US falls into recession, then it will impact the world's second largest economy China and the rest of the world.

Both are our top trading nations and thus Malaysia's external trade for 2024 will be challenging," said Aimi who is Universiti Kuala Lumpur business professor.

Don't rely too much on the domestic economy

Malaysia can no longer rely on the domestic conomy alone to bolster the 2024 gross domestic product or GDP.

Aimi said a more comprehensive strategic economic plan must be executed to reduce dependency on private consumption.

Will Malaysia's economy stand pat against external economic threats? Or will it be resilient? The next 12 months will be interesting to watch.