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Malaysia’s economic growth’s pace likely picked up in 1Q2024 — Mizuho Bank

Publish date: Mon, 15 Apr 2024, 02:36 PM

KUALA LUMPUR (April 15): Malaysia’s economic growth likely picked up in pace in the first quarter of the year (1Q2024), as exports and tourist arrivals accelerated, helping to cushion the decline in consumer spending, Mizuho Bank said.

Gross domestic product (GDP) may have expanded 3.9% for the January-March 2024 period from a year earlier, versus a 3.0% year-on-year growth in the final quarter of 2023, Mizuho said in a note to clients. Malaysia will release its advance estimates for GDP on April 19 and the full data on May 17.

“Signs of external demand for manufactured goods are certainly encouraging,” Mizuho said. “However, we remain relatively conservative on the magnitude of growth, as the manufacturing sector as a whole still underperforms the overall industrial sector,” it added.

Malaysia’s economy, the third-largest in Southeast Asia, have decelerated in recent quarters and most recently contracted 2.1% quarter-on-quarter on a seasonally adjusted basis, as the key manufacturing sector shrank and household spending moderated.

Still, policymakers are hopeful that domestic demand will remain resilient, while technology upcycle and better global trade will keep its export-oriented factories humming.

Monthly industrial production data points to encouraging signs that the slump in electrical and electronics products have bottomed, Mizuho said, noting that average exports and imports of manufactured goods in January-February had accelerated on a volume basis.

However, the bank cautioned that domestic strains “warrant a watchful eye” as food & beverages’ industrial production growth had moderated sharply in recent months, which could be an indication of stretched consumer wallets.

“Retail sales have been trending downwards as consumer confidence falls,” though higher tourist arrivals and expenditures during the Lunar New Year period could help lift the services sector, Mizuho flagged.

The first quarter of 2024 could also be the quarter where the effects of visa-free entry for Chinese tourists “start to show,” Mizuho added.

Malaysia waived visa requirements for Chinese travellers, who typically spend more on average compared to other nationalities, effective Dec 1, 2023 to Dec 31, 2024.

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