Kenanga Research & Investment

Malaysia 4Q24 Advance GDP - Growth slows to 4.8% as momentum subsides; overall 2024 growth ends higher

kiasutrader
Publish date: Fri, 17 Jan 2025, 04:10 PM
  • The Department of Statistics (DOSM) advance GDP report estimates that growth slowed to 4.8% in 4Q24 (3Q24: 5.3%), reflecting a second consecutive quarter of moderation. Overall, DOSM projects GDP growth to settle at 5.1% in 2024, a tad higher than the house forecast of 5.0%
    • The advance growth estimate marginally beat our house projection but below Bloomberg's consensus of 5.2%. The 19 estimates range from 4.3% to 7.2%.
    • On a quarterly basis, growth slowed to 2.5% (3Q24: 4.6%), tracking seasonal trends. The actual 4Q24 GDP results, including a detailed breakdown of demand and supply, will be released on February 14.
  • Weak output in manufacturing, mining and agriculture sectors partially offset by firmer services and construction performance
    • Services (5.3%; 3Q24: 5.2%): Expanded due to broad-based growth across all sub-sectors, led by wholesale & retail trade, transportation & storage, and information & communication.
    • Construction (19.6%; 3Q24: 19.9%): Maintained robust double-digit growth for the fourth consecutive quarter, driven by strong activity in the residential buildings and non-residential buildings segment.
    • Manufacturing (4.3%; 3Q24: 5.6%): Slowed to a three-quarter low but remained supported by strong production of electrical, electronic & optical products, petroleum, chemical, rubber & plastic products, and vegetable and animal oils & fats, and food processing.
    • Agriculture (-0.6%; 3Q24: 3.9%): Contracted slightly due to weak performance in oil palm and forestry & logging sub-sectors, though partially offset by double-digit growth in the rubber sub-sector.
    • Mining and quarrying (-1.4%; 3Q24: -3.9%): Contracted for the second quarter due to lower crude oil & condensate sub-sector production, though partially mitigated by increased natural gas output.
  • We maintain our 2024 GDP forecast at 5.0% (2023: 3.6%), slightly below DOSM advance estimates, and we project it to moderate slightly to 4.8% in 2025 as economic activity normalises
    • Drivers: Domestic demand will continue to drive growth in 2025, underpinned by higher household income from government salary hikes, increased minimum wages, and record-high cash transfers under Sumbangan Tunai Rahmah (STR). Tourism is expected to accelerate, exceeding pre-pandemic levels, with boosted government allocations ahead of the 2026 Visit Malaysia Year. The surge in approved investment, supported by various national policy frameworks and the potential impact of trade and investment diversion following the expected renewed US-China trade tensions, will further bolster growth.
    • Risks: The construction sector is projected to moderate after recording substantial growth last year amid a high base effect. Meanwhile, the implementation of targeted fuel subsidies later this year may impact consumer and business behaviour. Externally, policy shifts under Trump and uncertainty around China's economic recovery pose risks, especially to the global supply chain.
    • Outlook: Against this backdrop, we maintain 2025 GDP growth forecast at 4.8%, reflecting the normalisation of economic activity following an estimated 5.0% growth in 2024.

Source: Kenanga Research - 17 Jan 2025

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