Supply Side

• Malaysia’s economy grew at 3.0% y/y in 4Q2023 (3Q2023: 3.3% y/y) – supported by Services (4.2% y/y), Construction (3.6% y/y) and Agriculture (1.9% y/y) sectors. Mining and Quarrying sector rebounded to 3.8% y/y from a decline of 0.1% y/y in the 3Q2023. Meanwhile, the Manufacturing sector dropped slightly to 0.3% y/y.

• Malaysia’s economy overall grew 3.7% (2022: 8.7%) in 2023 with a value of RM1.57 trillion at constant prices.

Demand Side

• On the demand side, the performance was primarily driven by the year-onyear growth in the Private Final Consumption Expenditure (PFCE) that grew 4.2% (3Q2023: 4.6%), Gross Fixed Capital Formation (GFCF) rose 6.4% (3Q2023: 5.1%) while Government Final Consumption Expenditure strengthened to 7.3% (3Q2023: 5.8%).

• Exports recorded a smaller contraction of 6.3% against a decline of 12.0% in the preceding quarter. Imports contracted to 2.9% y/y. (3Q2023: -11.1%). Contrarily, imports rebounded to 2.6% (3Q2023: -0.8%) in terms of seasonally adjusted, according to DOSM.

Consumer Price Index

• Malaysia’s headline inflation edged up 1.8% in February 2024, following three consecutive months at a growth rate of 1.5%. The index point was recorded at 132.1. The increase in inflation was driven by Housing, Water, Electricity, Gas & Other Fuels (2.7%); Recreation, Sport & Culture (1.6%) and Transport (1.2%), while Restaurant & Accommodation Services (2.9%), Health (2.2%), Food & Beverages (1.9%) and Education (1.5%) recorded a slower increase in the same month.

• On a month-on-month basis, CPI increased 0.5% vs 0.2% in January 2024.

Core Inflation

• Core inflation in February 2024 remained at 1.8% y/y compared to the previous month. Monthly inflation in February 2024 registered 0.2% vs 0.3% in January 2024.

• Inflation without fuel which covers all goods and services except Unleaded petrol RON95, RON97 and Diesel, increased to 1.7% y/y in February 2024 (January 2024: 1.5% y/y) to 122.5 vs. 120.4 in the same month of the preceding year.

Inflation by State

• Five states recorded increases above the national inflation level; Pulau Pinang (2.7%), Pahang (2.4%), Selangor (2.1%), Perlis (2.0%) and Sarawak (1.9%), meanwhile Kedah recorded the lowest increase of 0.9% in February 2024.

• The number of employed persons grew 0.2% m/m or +25.3 thousand persons in January 2024 to 16.48 million persons. Meanwhile, the number of unemployed persons decreased further with a marginal drop of 0.1% to 567.3 thousand persons in January 2024 from 567.8 thousand persons in the previous month. The labour force participation rate (LFPR) was unchanged at 70.2%, as in the preceding month.

• The unemployment rate in January 2024 remained at 3.3%. Meanwhile, the employment-to-population ratio, which indicates the ability of an economy to create employment, rose by 0.1 percentage points to 67.9% (December 2023: 67.8%).

• The number of persons outside the labour force decreased marginally to 0.01% to 7.234 million persons in January 2024 compared to 7.233 million persons in the previous month.

• The Industrial Production Index rebounded 4.3% y/y in January 2024 (December: 0.03% y/y) to the highest growth recorded since May 2023. The year-on-year increase in January 2024 was supported by a surge of 3.7% in the Manufacturing sector compared to the negative 1.4% recorded in the previous month.

• The Mining sector sustained its upward trend by registering 5.0% (December 2023: 4.1%) while the Electricity sector rose 8.3% compared to 4.1% y/y in the preceding month.

• The sales value of the manufacturing sector rebounded to 3.2% y/y or RM152.7 billion in January 2024 (December 2023: -4.2%).

• On a month-on-month basis, sales value grew by 1.9% as compared to -3.3% recorded in December 2023.

• The domestic-oriented industries rose 8.0% against 4.2% in December 2023.

• Meanwhile the export-oriented industries turned positive to 1.6% after seven consecutive months in negative territory (December 2023: -4.1%).

• Sales value of wholesale & retail trade in January 2024 registered a growth of 5.4 % y/y to RM142.4 billion, contributed by the positive year-onyear growth in all sub-sectors namely Motor Vehicles (16.0%), Wholesale Trade (5.5%) and Retail trade (2.6%). For month-on-month comparison, sales value decreased -1.1%.

• The Leading Index continues to grow 3.2% y/y to attain 112.0 points in January 2024: expecting a more encouraging economic performance in the coming months, according to DOSM. Month-onmonth, the index rose 1.6% vs. 0.3% in the preceding month.

• The Coincident Index for the current economic position continued its growth since September 2021, rose 3.2% y/y to 124.1 points in January 2024, compared to 120.2 in the same month of the preceding year.

• The Diffusion Index for Leading Index (LI) reached 57.1% compared to 42.9% registered in the previous month.

• The Diffusion Index for Coincident Index (CI) however, registered a lower index of 50.0% compared to 66.7% previously.

• According to the Malaysian Institute of Economic Research (MIER), Consumer Sentiment Index (CSI) has edged up to 89.40 points in 4Q2023 from 78.90 points in the third quarter; showing a positive trend as it has rebounded from the lowest recorded in recent years.

• The Business Confidence (BCI) increased to 89.0 point, up by 9.3 points compared to the previous quarter. However, the index reading for 4Q2023 still falls below the 100-point threshold.

• According to the Department of Statistics (DOSM), Business confidence has continued its increasing trend since Q323, growing 4.2% in Q124, indicating that businesses are confident about the future business environment.

• All sectors expect stronger business conditions in 1Q24 with a confidence indicator of; Wholesale & Retail Trade sector (1Q24: +4.7%, 4Q23: -3.6%), Services sector (1Q24: +8.6%, 4Q23: +6.3%), Construction sector (1Q24: +10.3%, 4Q23:1.7%) & Industry sector (1Q24: +0.6%, 4Q23:4.0%).

• Malaysia’s exports in February 2024, worth RM111.3 billion, fell by 0.8% y/y vs. 10.3% y/y in February 2023. However, imports increased 8.4% y/y to RM100.5 billion.

• Trade balance recorded a surplus of RM10.9 billion vs. RM19.6 billion in the same month of the preceding year; marking the 46th consecutive month of surplus since May 2020.

• Total trade continued its positive trend of 3.3% y/y to value RM211.8 billion in February 2024 compared to RM205.0 billion in the same month of the previous year.

• Domestic exports increased 4.7% y/y from RM87.4 billion in the same month of the preceding year to RM91.5 billion in February 2024, while re-exports with a value of RM19.8 billion, decreased by 20.2% y/y from RM24.8 billion in the previous year

• On a year-on-year year basis, Imports by End Use for Intermediate goods increased by 14.3% (RM55. 7b; 55.5% of total imports), Capital goods rose by 30.3% (RM10.2b; 10.2% of total imports) while consumption goods valued at RM8.4b grew by 19.7% or 8.4% of total imports.

• The industry total loan growth accelerated to 5.7% y/y in January 2024 from 5.3% y/y in the previous month. The household loan growth rose to 6.1 y/y, while non-household increased to 5.1% y/y in the same month, compared to 4.5% y/y in December 2023.

• Loan applications in January 2024 grew stronger to 39.8% compared to -8.8% y/y in the same month of the preceding year. In the household segment, both households and nonhouseholds also saw higher growth in loan applications in the same month.

• The banking sector’s aggregate loan-to-fund ratio remained broadly stable at 81.6% in January 2024 vs. 81.8% in December 2023. The loan-to-deposit ratio (LD Ratio) for the sector picked up to 86.0%, while the aggregate Liquidity Coverage Ratio (LCR) continued to record a healthy liquidity buffer of 160.2% (December 2023: 160.9%).

• Total deposit growth for the banking system moderated 5.2% y/y in January 2024 (December 2023: 5.6%). The demand deposits, fixed deposits and saving deposits register a growth of 7.4%, 4.3% and 0.3% respectively.

• The banking system’s current account saving account (CASA) continued to grow for the fourth consecutive month to 5.1% y/y in January 2024, leading to a higher CASA ratio of 29.8% in January 2024 vs.29.5% in the previous month.

• According to Bank Negara Malaysia (BNM), credit to the private non-financial sector grew by 5.0% y/y as at end January 2024 (December 2023: 4.7%), supported by higher growth in outstanding loans (December 2023: 5.4%).

• Business loans outstanding increased to 4.2% (December 2023: 3.6%) supported by higher growth in investment-related loans. The outstanding loans to SMEs remained forthcoming with a marginal decline to 8.0% y/y from 8.2% in the previous month while the outstanding corporate bonds growth moderated slightly to 3.6% (December 2023: 4.2%).

• In the household segment, outstanding household loan grew 6.0% in January 2024, supported by stable growth across most loan purposes especially for houses and cars purchases.

• The aggregate Liquidity Coverage Ratio recorded 160.2% while the aggregate loan-to-fund ratio remained stable at 81.6% vs. 81.8% in December 2023.

• The Total Industry Volume (TIV) for February 2024 registered a total of 62,833 vehicles, down by 4.1% m/m compared to 65,499 units delivered in the previous month. On a yearly basis, vehicle sales declined to 1.1% y/y vs. 30.6% y/y in January 2024, due to the shorter working month during the Chinese New Year holiday, according to the Malaysian Automotive Association (MAA).

Source: AmInvest Research - 1 Apr 2024