KUALA LUMPUR (April 22): The World Bank has kept its 2024 economic growth outlook for Malaysia at 4.3%, though it sees a potential upside coming from higher oil prices due to the ongoing conflict in the Middle East.

The 4.3% gross domestic product (GDP) growth in 2024 will be mainly driven by private consumption, according to World Bank lead economist for Malaysia Dr Apurva Sanghi. Malaysia’s economy grew by 3.7% in 2023, which was also mainly supported by strong private consumption.

“It is worth noting that most of this growth will be driven by domestic demand and not investment. In fact, as a share of GDP, 3.4% will come from private consumption,” he told a media briefing during the release of the World Bank’s April 2024 Malaysia Economic Monitor report 'Bending Bamboo Shoots: Strengthening Foundational Skills' on Monday.

While investments are expected to only constitute 0.9% as a share of GDP, Apurva believes that investments’ contributions will accelerate once the government begins to implement initiatives under the New Industrial Master Plan (NIMP) 2030.

And rising oil prices are a potential upside to the World Bank’s forecast.

“The upside risks, one of them is in fact higher oil prices — which is actually materialising. If you look at the situation in the Middle East as tragic as it is, oil prices are going up and that from a pure fiscal sense is good for Malaysia as a commodity exporter,” said Apurva.

“The caveat is that if oil prices — the upside risk — continue to materialise, that could pose a downside risk because it could delay the implementation of subsidy rationalisation,” he said.

“It's always more difficult to retarget or rationalise subsidies when commodity prices are high,” he added.

At the time of writing, Brent, the global benchmark for crude oil, was down US$1.37 or 1.57% at US$85.92 per barrel.

Previously, economists raised concerns over a closure of the Strait of Hormuz, the world’s most important oil chokepoint, which would potentially result in supply shortages. In 2022, about 21% of the world’s petroleum liquid consumption flowed through the strait.