KUALA LUMPUR (April 9): Economists expect Malaysia’s gross domestic product (GDP) to grow faster this year following February’s wholesale and retail trade expanding to a three-month high of 5.5% year-on-year (y-o-y).

Given the better y-o-y growth in February’s wholesale and retail trade data, Kenanga Research has maintained its sales growth projection at 8% for 2024 — higher than the 7.7% growth recorded in 2023. Its stronger projection for sales growth this year is driven by robust domestic demand supported by a projected decline in the unemployment rate to an average of 3.2% this year and a rise in tourist arrivals and spending.

However, the uncertainty in the mechanism of subsidy rationalisation could weigh on consumer spending and subsequently affect overall sales growth, it noted.

Nonetheless, the research firm continues to project an expansion in the first quarter of this year (1Q2024) GDP growth at 3.3%, against 3% in the fourth quarter of last year, given the sustained domestic demand, backed by recovery in the manufacturing sector.

“Likewise, we maintain our 2024 GDP growth forecast at [between] 4.5% and 5% (2023: 3.7%), reflecting our expectation of a further rebound in the manufacturing sector, particularly the export-oriented sub-sector,” it added.

Earlier, the Ministry of Finance has forecast Malaysia's GDP to grow at between 4% and 5% this year, after the country achieved a 3.7% growth in 2023 and grew 8.7% in 2022.

Maybank Investment Bank (Maybank IB) echoed a similar sentiment, saying that its monthly GDP tracker estimated the economy grew 3.3% y-o-y in February 2024. This, together with the 4% y-o-y growth in January 2024, brings the average growth to 3.7% in the first two months of this year, higher than 3% y-o-y growth in 4Q2023.

This signalled firmer economic growth in 1Q2024, supporting its annual GDP growth forecast of 4.4% in 2024, versus 3.7% recorded in 2023.

Commenting on the retail trade, Maybank IB said the pickup in retail trade volume was in line with its expectations of firmer consumer spending in February and April this year, driven by school holiday season, back-to-school and festive (Ramadhan and Eid) spending, disbursements of the special one-off incentive to government employees and pensioners, and the first two tranches of cash handouts to lower income households in February and April this year.

Malaysia’s wholesale and retail sales rose 5.5% to RM142.1 billion in February from a year earlier, the Department of Statistics data on Monday showed. That compared to January’s 5.4% and December’s 4.8% y-o-y increase.

However, distributive trade contracted for a second month at 0.9% month-on-month (m-o-m) in February, albeit at a smaller rate than the 1.1% m-o-m contraction in January this year.

The retail sector rose 5.8% y-o-y to RM61.5 billion supported by sales in non-specialised stores, which grew 6.7%, and specialised store sales, which surged 9.5%.

For the wholesale segment, it expanded 5.2% y-o-y to RM62.2 billion, supported by other specialised wholesale, which rose 7.4% in February, and wholesale of food, beverages and tobacco.

MIDF Amanah Investment Bank said it maintained a 7.5% expansion projection in retail trade for 2024, underpinned by resilient labour market, positive real wage growth, improved tourism activities, and accommodative economic policies.

However, the research firm cautioned that upward inflation pressure may affect consumer demand depending on the potential effects of targeted subsidy approaches and fluctuations in global commodity prices.