Malaysia’s Economy Remains Resilient, Supported by Consumer Spending, Technology Cycle, and Tourism
KUALA LUMPUR: The Malaysian economy fundamentally remains resilient, largely driven by consumer spending, the technology cycle, and increased revenues from the tourism and travel industries, despite concerns over rising living costs and a weakening ringgit.
These positive indicators have bolstered confidence that the economy can achieve a commendable growth of 5.0 percent in 2024 and continue to expand at a faster rate in the coming years.
Optimism surged after Malaysia recorded a satisfactory growth rate of 4.2 percent in the first quarter of 2024 (Q1 2024). Bank Negara Malaysia (BNM) has maintained its forecast for the economy to grow between 4.0 and 5.0 percent this year, driven by strong growth in Q1 2024.
Following this, Chief Economist of Bank Muamalat Malaysia Bhd, Mohd Afzanizam Abdul Rashid, expressed confidence that economic growth could approach 5.0 percent this year despite concerns about higher living costs and a weaker ringgit. He cited that the Consumer Sentiment Index (CSI) has remained below 100 points for five consecutive quarters since Q1 2023, with the latest figure at 87.1 points in Q1 2024, down from 89.4 points in the fourth quarter of last year.
“However, spending defied the trend and increased. Consumer spending grew by 4.7 percent in Q1 2024 (Q4 2023: 4.2 percent). The economy should be able to grow more healthily for the remainder of 2024,” he told Bernama.
Mohd Afzanizam also linked economic growth to the introduction of Account 3 by the Employees Provident Fund (EPF), which allows account holders to withdraw up to 10 percent of their funds. He believes that EPF withdrawals will boost spending power in the second half of 2024.
“The perception that the withdrawal of EPF Account 3 has a minimal impact on spending is incorrect. While it may be smaller than the four withdrawals totaling RM145 billion during the pandemic era, this 10 percent could translate to between RM20 billion and RM30 billion,” he said.
Meanwhile, Chief Investment Research Officer at UOB Kay Hian Wealth Advisors, Mohd Sedek Jantan, stated that the firm projected a GDP growth of 4.4 percent in the first quarter and has been optimistic about the country’s economy since November last year.
“The country’s economic recovery is on the right track, driven by its trade-oriented economy. This recovery is supported by a fall to the lowest levels and a rebound in the electronics cycle along with continued growth in travel and tourism,” he said.
He emphasized that exports, particularly in electronics, are expected to recover moderately in 2024 after facing a challenging 2023 due to declines in manufacturing and shipping activities.
“This recovery is anticipated from the benefits gained in the increased global electronics sales, which adjusted after inventory stock was depleted in 2023, aided by a favorable base effect,” he added.
Regarding the overnight policy rate (OPR), Mohd Afzanizam opined that BNM is striving to balance supporting economic growth while managing the risk of higher inflation.
“BNM’s message is clear that the risks to inflation are increasing, particularly due to policy changes such as fuel subsidies and higher input costs due to exchange rates. Therefore, the possibility of a higher OPR cannot be ruled out. It will depend heavily on data, particularly on how consumer spending holds up despite the challenges of higher living costs,” he added. – BERNAMA
