KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB) has adjusted Malaysia's gross domestic product (GDP) estimate fto 3.9 per cent from 3.8 per cent.

This will be spurred by stronger performances in most sectors, especially services, manufacturing and construction.

HLIB said on the demand side, growth is expected to be mainly driven by private consumption and a recovery in export activity.

"We expect a pickup in the services sector, reflected by the stronger volume index of services showing in the first quarter of 2024 (1Q24) at 4.5 per cent year-on-year (YoY) driven by the acceleration in the business services and finance subsector.

"Growth was also propped up by the food and beverages (3.7 per cent YoY) and accommodation subsectors (12.0 per cent YoY) amid the continued rise in tourism activities," it said.

The bank also noted that the construction sector is expected to experience higher growth, consistent with the surge in the value of construction work done. 

The civil engineering and non-residential building sub sectors remained the two largest contributors to the overall value of construction work completed.

Meanwhile, HLIB expects the manufacturing sector to rebound, following increases in the manufacturing Industrial Production Index (IPI) of 2.1 per cent YoY, compared to 0.2 per cent YoY in the fourth quarter of 2023 (4Q23).

"This was mainly due to the recovery in export-oriented manufacturing activity amid an improving global manufacturing situation and higher semiconductor demand which offset the moderation in domestic-oriented manufacturing activity," it added.

The mining sector is expected to see higher growth due to strengthened production, with the mining IPI rising by 5.9 per cent YoY compared to 3.7 per cent in 4Q23, driven by increased natural gas production.

In contrast, the agriculture sector's growth is expected to moderate but will still be supported by palm oil production.

HLIB said private consumption is anticipated to remain a key growth driver due to a stable labour market and ongoing wage growth in the services and manufacturing sectors.

"This is evidenced by stronger retail sales in 1Q24 at 3.8 per cent YoY, compared to 4Q23 at 2.9 per cent YoY, which was likely boosted by festive activities. 

"The recovery in export activity (2.2 per cent YoY; 4Q23: -6.9 per cent YoY) is also expected to support overall GDP growth," it noted.

HLIB maintained its expectations for Malaysia's economic growth to normalise upwards to 4.8 per cent, driven by favourable domestic demand and a rebound in global trade.

"The introduction of a flexible Employees' Provident Fund account in May 2024 and salary increase for civil servants in December 2024 are also expected to lift private consumption further, though the extent may be neutralised subject to pending subsidy reforms," it added.

https://www.nst.com.my/business/economy/2024/05/1050379/hlib-revises-malaysias-q1-gdp-growth-higher