KUALA LUMPUR (July 29): Gross domestic product (GDP) growth is projected to reach the upper end of Bank Negara Malaysia’s (BNM) 4% to 5% target in 2024, according to CIMB Treasury and Markets Research.

This follows a 5.8% year-on-year increase in the advance GDP estimate for the second quarter of 2024 (2Q2024), the bank said in a note on Monday.

CIMB cited factors such as a resilient labour market, robust household spending, ongoing multi-year investments, increased foreign direct investment (FDI) realisation, trade recovery and improving tourism as key contributors.

Additionally, the ringgit has outperformed its peers, as coordinated actions have moderated pressure from rate differentials, global developments, and geopolitical risks.

“BNM has observed healthier two-way forex flows, supported by investment income and export conversions, as well as the fast-track flexibility for corporates to invest abroad. This reiterates that interventions are market-driven and not a prelude to capital controls.

“The build-up of short forward positions is aimed at managing domestic ringgit liquidity,” it said.

Meanwhile, CIMB highlighted that Malaysia is directing liquidity towards investments to stimulate growth. Government-linked investment companies are poised to allocate between RM400 billion and RM500 billion into investments over the next five years.

These investments are crucial for developing incentives and regional ecosystems, such as the Johor-Singapore Special Economic Zone, Forest City, and various industrial park projects. 

They will also facilitate matching funding with projects, and extend FDI benefits through onshore supply chains.

CIMB added that the implementation of reforms and a stronger foundation for Malaysia’s domestic fundamentals are likely to enhance Malaysia Government Securities yields, which have a 12-month target of 3.75%-3.80%.

Coupled with improving investor sentiment and potential US policy rate cuts, these factors are also expected to influence the US dollar to ringgit exchange rate, which has a 12-month target of 4.53.

https://www.theedgemarkets.com/node/720725