Malaysia's economy on track for 4-5 per cent growth in 2024 - BNM

Domestic spending, export rebound to fuel Malaysia's economic expansion

23 Mar 2024 12:02pm
Pix for illustration purpose only. - FILE PIX
Pix for illustration purpose only. - FILE PIX

KUALA LUMPUR - The Malaysian economy is projected to grow between 4.0 per cent and 5.0 per cent in 2024, underpinned by continued expansion in domestic demand and improvement in external demand, said Bank Negara Malaysia (BNM).

In its Economic and Monetary Review 2023 report, the central bank said growth will be driven by resilient domestic expenditure, with additional support from the expected recovery in exports.

"Tourism is expected to improve further, while the implementation of new and ongoing multi-year projects by both the private and public sectors would support investment activity.

"Nevertheless, domestic growth remains subject to downside risks from both external and domestic factors," it said.

BNM expects the expansion in economy will lead to a higher surplus in the current account of the balance of payments of between 1.8 per cent and 2.8 per cent of gross domestic product (GDP) in 2024 -- an improvement from 1.2 per cent of GDP in 2023.

Last year, Malaysia’s GDP recorded a moderate growth of 3.7 per cent on the back of continued recovery in economic activity and labour market conditions, despite challenging external environment.

Domestic Demand Remains Key Driver

BNM expects domestic demand to remain the key driver of growth in 2024, with household spending is projected to expand at a faster pace of 5.7 per cent compared with 4.7 per cent in 2023 supported by improving labour market conditions amid higher income growth and targeted government assistance.

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"These will partly cushion the impact of higher cost of living, the implementation of low-value goods (LVG) tax, and increase in service tax on household spending," it said.

Private consumption is projected to grow by 5.7 per cent in 2024 vis-a-vis 4.7 per cent in 2023 underpinned by the continued improvement in labour market conditions, said BNM.

Whilst the unemployment rate is projected to decline to 3.3 per cent, the employment growth is expected to continue expanding, supported by sustained demand for workers, it said.

Headline inflation is expected to remain moderate, between 2.0 per cent and 3.5 per cent this year, amid contained cost pressures from easing global supply conditions.

Expansion In Most Economic Sectors

Most economic sectors are projected to grow in 2024, with services and manufacturing sectors to be the key drivers to overall growth.

BNM expects the services sector to grow by 5.5 per cent this year from 5.3 per cent in 2023, driven mainly by improvement in the business-related subsectors.

"The recovery in external demand and ongoing implementation of private and public construction projects will support the real estate and business services as well as the transport and storage subsectors.

"Further rollout of 5G network coverage and its increased subscriptions will drive growth in the information and communication subsector," it said.

BNM said the manufacturing sector is expected to expand by 3.5 per cent in 2024 from 0.7 per cent in 2023, supported by the recovery in the export-oriented industries and sustained growth in the domestic-oriented cluster.

Construction is expected to grow by 6.7 per cent this year, mining and quarrying (3.5 per cent), while agriculture to record a contraction of -0.5 per cent as dry weather conditions associated with the El Nino and the effects of previous years’ under-fertilisation would lead to lower oil palm production.

Vibrant Investment Landscape

BNM expects private investment to improve to 6.1 per cent this year against 4.6 per cent last year, lifted by further progress in the implementation of multi-year projects, as well as ongoing efforts in automation and digitalisation amid continued capacity expansions.

Continued public investments in large-scale transport and digital infrastructure projects will also support growth this year, in addition to ongoing reform efforts by the government to enhance the investment ecosystem and the implementation of initiatives under the strategic master plans.

"Catalytic projects and focus areas under the major national master plans such as the New Industrial Master Plan 2030 (NIMP 2030) and the National Energy Transition Roadmap (NETR) are expected to lend some support to investment activity.

"These include infrastructure projects, as well as investment in industries such as electrical and electronics (E&E), chemical, pharmaceutical, advanced materials, renewable energy and electric vehicles," it said.

For the third consecutive year, public investment is projected to expand by 6.2 per cent in 2024 -- above its pre-COVID-19 average growth of -0.2 per cent.

BNM believed this to be driven by both the government and public corporations.

Public investment includes the ongoing large-scale infrastructure projects, such as the East Coast Rail Link (ECRL), Pan Borneo Highway and Rapid Transit System Link (RTS Link), it added.

Improved Trade Activity

Malaysia’s gross exports is expected to turn around, recording a growth of 5.0 per cent in 2024 versus a contraction of 8.0 per cent in 2023.

This rebound is underpinned by the recovery in global trade and the technology upcycle, supporting electrical and electronics (E&E) and non-E&E exports, as well as higher commodity prices underpinning commodity exports, said BNM.

Manufactured exports, which account for 85 per cent of Malaysia’s total exports, are projected to grow by 4.7 per cent in 2024, while commodities exports are projected to grow by 6.5 per cent amid higher crude palm oil prices, it said.

"The export projections are subject to downside risks. These stem mainly from slower-than-expected economic activities among key trading partners, unexpected domestic disruptions for commodity production and further escalation of geopolitical conflict.

"However, stronger-than-expected spillover from the global tech upcycle could provide an additional lift to Malaysia’s exports," it said.

Gross imports are projected to grow by 5.4 per cent in 2024 versus a decline of 6.4 per cent last year in tandem with higher exports and improving domestic demand. - BERNAMA