KUALA LUMPUR (Feb 14): Economists expect Malaysia's economy, as measured by gross domestic product (GDP), to grow between 3.3% and 3.4% year-on-year (y-o-y) in the fourth quarter of 2023 (4Q2023), which will be released on Friday (Feb 16).

Hong Leong Investment Bank (HLIB) Bhd has revised downwards its forecast for the country’s 4Q2023 GDP to 3.3% — slightly lower than the research house’s forecast, the consensus forecast and the Department of Statistics Malaysia’s (DOSM) advance estimate of 3.4% — due to a further contraction in the manufacturing sector.

The research house said in a note that growth is expected to remain stable at 3.3% y-o-y, the same as the 3.3% y-o-y growth in 3Q2023, supported by continued expansion in most sectors, except manufacturing. “On the demand side, private consumption is expected to remain the key driver of growth”.

HLIB, however, maintains its projection for 2024, anticipating GDP growth to normalise upwards to 4.8% y-o-y — compared to the Ministry of Finance’s forecast of between 4% to 5% — on the back supportive domestic demand, recovery in global trade activity due to low base effect, favourable labour market conditions, recovery from the global tech downturn, continued rise in tourism activities as well as realisation of approved investments.

Maybank Investment Bank Bhd also estimated GDP growth for 4Q2023 at 3.3%, in line with the research house’s estimates of a 0.2% y-o-y contraction in manufacturing (versus advanced estimate of +0.1% y-o-y) and lower services sector growth of 4.5% (against advanced estimate of 4.7% y-o-y), offsetting projections for higher growth in the agriculture, mining and construction sectors.

Meanwhile, AmBank Group concurred with DOSM’s advance estimate of 3.4% due to a solid and sustained expansion driven by higher labour productivity and healthier distributive trade sales.

For 2024, AmBank maintains its full-year GDP growth forecast at 4.5%, as the research house posits that export may recover in 2024 as the global tech cycle may have bottomed out.

This is because 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, it said.

Nonetheless, AmBank said it remains cautious of the impending subsidy rationalisation that may lower the research house’s estimates due to higher inflation.

“We foresee no strong case for the Bank Negara Malaysia 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,” it added.