KUALA LUMPUR (Aug 5): Malaysia’s economic growth is expected to slow down in the later part of 2024, following a strong first-half, Kenanga Investment Bank said and flagged rising external risks.

Gross domestic product will likely come in at 4.3%-4.6% in the remaining quarters of 2024, following a 5.0% growth in the first six months of 2024, it said. For the whole of 2024, Kenanga projects the economy to expand 4.5%-5.0%, in line with the official forecast of 4.0%-5.0% growth.

“Our cautiously optimistic outlook is tempered by the elevated risk from the external sector, particularly the potential global economic slowdown due to global monetary tightening and China’s slower-than-expected economic recovery,” it said.

Malaysia is highly dependent on trade, with exports and imports of goods and services totalling more than double the size of its gross domestic product (GDP). China is Malaysia’s biggest trading partner and Malaysia is also reliant on shipments to the US.

There are now fears over the health of the US economy, at a time when the Chinese economy is expected to undergo a structural slowdown over the medium term.

Kenanga said it is now cutting its growth forecast for gross exports to 7.3% from 9.4% previously, citing China’s economic uncertainty, higher US tariffs on Chinese goods, and the impact of the Red Sea crisis causing global port congestion.

The downside risks to domestic growth outlook, however, “remains limited”, thanks to strong domestic demand and continued expansion of the services sector, Kenanga said.

Further, partial pension fund withdrawals, increased tourist arrivals and spending, a stable average unemployment rate, and higher household income driven by realised investment, will provide support, the house added.