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Second – half outlook improves, Malaysia set to achieve GDP growth target

Despite hiccups brought about by the volatile global environment in the first half of 2023 (H1’23), Malaysia’s economy is set to navigate through the second half of the year on continuous support from strong households, intact economic fundamentals, and improved outlook.

Economists are of the view that the gross domestic product (GDP) target of between 4% and 5% set by the government for 2023 is achievable and the country is on track to realize it.

They also believe the external variables influencing growth, which impacted the economy in H1’23, including the US Federal Reserve’s monetary stance, the US dollar and China’s disappointing rebound, are likely to do favours for Malaysia in the second half of 2023 (H2’23).

Bank Muamalat Malaysia Bhd chief economist and social finance head Dr Mohd Afzanizam Abdul Rashid said Malaysia has set a strong footing during H1’23 underpinned by a healthy labour market, better tourist arrivals and higher vehicle sales, among others, amid a gloomy external front.

He said this provided solid support to GDP and the onus now is on domestic demand to ensure that Malaysia’s growth momentum continued.

Thus far, he said, the labour market has demonstrated a positive trend with the number of unemployed individuals falling to 584,600 in May 2023 from as high as 826,100 in May 2020.

“Such trend is very much in line with the reopening of the economy since October 2021 and this has been instrumental to the livelier economic activity,” he told Bernama.

He said the country has also witnessed the total industry volume for the automotive sector rising 11.7% year-on-year to 299,463 units for the first five months of 2023.

Additionally, he said the total airport passenger traffic increased by a whopping 102.2% to 31.9 million passengers between January and May this year.

“In that sense, our domestic demand has continued to improve, thereby ensuring the targeted 4% to 5% GDP growth can be achieved for this year,” he said.

Newly appointed Bank Negara Malaysia (BNM) governor Datuk Abdul Rasheed Ghaffour recently told Bernama that the central bank is still maintaining its forecast for the country’s GDP growth this year as domestic demand remained resilient.

Manulife Investment Management Chief Investment Officer, Asia (ex – Japan) fixed income, Murray Collis said inflation across Asia has been relatively well contained compared with developed countries..

He said Asian central banks are in a relatively good position to hold monetary policy steady or even move to an accommodative stance in the coming quarters.

Meanwhile, Manulife Investment Management global macro strategy for multi – asset solutions team co-head Sue Trinh said inflation in Malaysia is looking benign, making it less of a headwind for discretionary spending.

“That also puts less pressure on Bank Negara to hike rates aggressively,” she said, citing the rotation of spending from goods to services has helped underpin economic activity globally.

After four consecutive increases in 2022, totaling 100 basis points (bps), and two consecutive pauses in early 2023 at 2.75%, BNM on May 3 unexpectedly raised the Overnight Policy Rate by 25 bps to match the pre-pandemic level of 3%.

BNM’s Monetary Policy Committee believes the global economy continues to be driven by resilient domestic demand while both headline and core inflation are projected to trend lower in H2’23.

  • The Sun Daily