Background Summary

We concur with the Department of Statistics Malaysia (DOSM)’s advance estimate of 3.4% growth in 4Q2023 and 3.8% in FY2023. According to DOSM’s advance estimate, Malaysia’s 4Q2023 Gross Domestic Product (GDP) growth came in at 3.4% year-on-year (y/y) based on the output or production/sectoral approach. Based on the expenditure approach, our model suggests that Malaysia's 4Q2023 also grew by 3.4% y/y due to solid and continuous expansion driven by higher labour productivity and healthier distributive trade sales.

FY2023: Private consumption share to GDP may have peaked at around 60%. On an annual basis, our model also suggests that government spending to GDP has been trending above 13% annually since the pandemic. We take note of the declining share of investments to GDP, from 25.4% in 2016 to 21.4% in 2023.

We maintain our forecast for full-year 2024 GDP growth at 4.5%. Having said that, we are sanguine about Malaysia’s growth prospects in 2024, where we expect GDP growth to come in at 4.5% y/y. We posit that exports may recover in 2024 as the global tech cycle may have bottomed out. Market indicators suggest that the semiconductor industry reached its low point at the end of 1H2023 and has since embarked on a path to recovery, offering positive prospects for 2024. Nonetheless, we remain cautious of the impending subsidy rationalisation that may lower our estimates due to higher inflation.

Status quo monetary policy until the end of 2024. We foresee no strong case for the Bank Negara Malaysia (BNM) to act on rates. Other than subsidy rationalisation, there is no immediate inflationary pressure when Malaysia has a positive real rate, which is expected to stay throughout 2024.

Source: AmInvest Research - 14 Feb 2024