KUALA LUMPUR (March 27): The Federation of Malaysian Manufacturers (FMM) has adopted a “more cautious” stance on Malaysia’s economic outlook for 2024, tempered by lower consumer spending against the backdrop of higher inflation and living costs.

“Consumer spending likely would be more restrained in 2024, with the hike in the SST rate and the government subsidy rationalisation programme, which would exert pressure on inflation and the cost of living,” FMM president Tan Sri Soh Thian Lai said in a statement on Wednesday.

Being less sanguine on private consumption spending, FMM expects Malaysia’s economic growth to settle at the lower end of the official forecast of 4% to 5% this year.

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Nonetheless, FMM believes that the Malaysian economy is poised for an export-led recovery as Malaysia’s purchasing managers index’s (PMI) reading signals that manufacturing activities have troughed and are on course for a gradual recovery.

“While the surge in intermediate imports foreshadows an export recovery, a tourism boom and a pick-up in investment momentum would add support,” he said.

The recovery in exports and tourism is also expected to be a potential silver lining for Malaysia in the second half of 2024 amid the easing of global monetary conditions.

“A modest recovery in exports, the uptick in investments and the recovery in the tourism sector will continue to drive growth. A better second half of 2024 is expected as global monetary conditions ease,” he said.

Touching on the local currency, FMM noted that the ringgit exchange rate will end on a firmer footing this year as developed markets' central banks are expected to cut interest rates in the second half of 2024.

However, FMM warned of the global risks to the "potential rod bumps" amid the prevailing tight monetary policy, slowing consumption, fiscal consolidation, climate events and geopolitical risks.

“While China’s economic recovery is yet to fully gain traction and Japan came close to a technical recession, delinquent real estate loans threaten to inflict major losses on US banks. Anti-China rhetoric is also expected ahead of the US presidential election," he added.

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