KUALA LUMPUR: This year has been a challenging one for both the global and Malaysian economies amid escalating geopolitical tensions and the persistent tightening of monetary policies to combat inflation, increasing the risk of a deeper worldwide economic slowdown.
The situation has been aggravated by the uncertainties in major economies, impacting developing nations and weakening the trade dynamism against a backdrop of ongoing trade tensions.
Malaysia is not immune from these global developments, given its open and trade-dependent economy.
Prime Minister Datuk Seri Anwar Ibrahim said the diversified structure of the Malaysian economy and solid fundamentals built over the years have bolstered the economy’s resilience and put the country on a steady growth path.
“These positive factors, supported by firm policies and action plans anchored on the framework of the MADANI Economy, as well as the continuous implementation of pragmatic measures and initiatives laid down by the government, will keep our economy strong and resilient.
“While the external sector remains important, growth is increasingly driven by domestic demand,” he said recently in the Economic Outlook 2024 report which was released by the Ministry of Finance in October.
Malaysia’s economic momentum continues to be sustained by manageable inflation, favourable labour market conditions,
healthy foreign reserves, a current account surplus and high national savings, as well as a robust financial sector and a well-developed capital market.
When tabling the Supply Bill 2024 for the second reading in the Dewan Negara recently, Anwar said Malaysia had managed to secure investment commitments worth RM347 billion from his official visits this year and trade and investment missions overseas.
Anwar said the commitments were clinched during trips to China, Singapore, Japan, South Korea, the United Arab Emirates, Saudi Arabia and the United States.
“The investment commitments are quite large and very encouraging, both resulting from the visits and efforts of government agencies, including the Investment, Trade and Industry Ministry,” he said, adding that the government had also approved investments valued at RM132.6 billion in the first half of 2023, representing more than 60 per cent of the full-year target.
Malaysia’s total trade also surpassed the RM2 trillion mark from January to October this year, reaching RM2.181 trillion, with exports amounting to RM1.186 trillion while imports were valued at RM995.55 billion.
Economic growth remains healthy
Amid the global economic slowdown, the Malaysian economy expanded by 3.3 per cent in the third quarter of 2023 (3Q 2023) and is expected to grow at about 4.0 per cent overall in 2023.
Bank Negara Malaysia (BNM) governor Datuk Abdul Rasheed Ghaffour said household spending remained supported by continued growth in employment and wages, while investment activity was underpinned by the progress of multi-year projects and capacity expansion by companies.
“Exports remained soft amid prolonged weakness in external demand. This, however, was partially offset by the recovery in inbound tourism.
“On the supply side, the services, construction and agriculture sectors remained supportive of growth,” he said during the 3Q gross domestic product (GDP) announcement in October.
The Prime Minister said that the success in charting the economic growth and overcoming crises would not be possible without the sacrifice and dedication of the people.
“The government remains resolute to ensure all Malaysians can enjoy the fruits of the nation’s wealth and prosperity through sustainable and inclusive growth. Recognising this, the framework of ‘MADANI Economy: Empowering People’ was formulated with the utmost priority to serve the people,” he added.
The government has set several targets to be achieved by the country within the next ten years.
“These initiatives are anticipated to drive the nation’s economy, with a projected growth rate of 4.0 to 5.0 per cent in 2024. It is vital to ensure that the economic pie distribution is fair and equitable, prioritising excellent healthcare services and quality education for all Malaysians,” Anwar said.
Ahmed Razman, the director of MBA programmes and associate professor at Putra Business School, said overall, Malaysia is still capable of generating income in the face of a challenging environment.
“Malaysia still records positive growth although it is slightly lower compared with the previous year, but it still demonstrates the ability to make economic progress in a challenging global environment.
“The inflation rate continues to decrease for nine consecutive periods to only 2 per cent currently and we also don’t see drastic hikes in interest rates such as the overnight policy rate (OPR), (now) only at 3 per cent,” he told Bernama.
Furthermore, he noted that the latest data showed the unemployment rate dropping to 3.2 per cent.
NETR, NIMP 2030 and 12th Malaysia Plan
Launched on July 27 this year, the MADANI Economy framework serves as a foundation for recently announced policies, including the National Energy Transition Roadmap (NETR), the New Industrial Master Plan 2030 (NIMP 2030) and the Mid-Term Review of the 12th Malaysia Plan.
The NETR Phase 1, launched in July by Economy Minister Rafizi Ramli, marks the beginning of efforts to put the narrative of energy transition in the mainstream of the country’s development.
Simultaneously, Rafizi announced 10 flagship projects that are expected to generate investments totalling RM25 billion and create 23,000 high-value job opportunities.
The NETR is not just a document outlining steps to achieve net-zero targets but a combination of strategies and initiatives that can transform the economy, people’s livelihoods and the country’s position on the world map.
The NIMP 2030, launched on Sept 1, 2023, will breathe new life into planning for the country’s industrial direction for the next phase of economic growth.
The master plan takes a four-mission-based approach to drive large-scale industrial transformations, aimed at advancing the economy, building a technologically advanced nation, moving towards reducing carbon emissions and establishing a sustainable economy.
The Mid-Term Review of the 12th Malaysia Plan (12MP) aims to realise the needed reforms desired by the people, with full efforts in translating the aspirations of Malaysia MADANI based on the MADANI Economy.
The last two years of the implementation of the 12MP will be a critical point in ensuring continuous planning to accelerate the country’s development and empower the people.
Brighter outlook
The Department of Statistics Malaysia (DOSM) reported that Malaysia’s latest data indicated that the country’s leading index (LI), a tool utilised for predicting economic trends four to six months ahead, improved to negative 0.3 per cent by recording 109.3 points in September 2023 compared to negative 0.5 per cent, anticipating a healthier economic outlook ahead.
Looking at the smoothed long-term trend in September 2023, DOSM anticipated the LI to remain below the 100-point trend and that the economy is expected to grow moderately, supported by encouraging local demand amid currency challenges and the world economic slowdown.
Chief statistician Datuk Seri Mohd Uzir Mahidin said the Bursa Malaysia Industrial Index (20.8 per cent) and number of housing units approved (17.6 per cent) contributed positively to the LI.
In terms of the current economic scenario, DOSM said the coincident index (CI) rose by 2.1 per cent to 123.8 points in September 2023 compared to 121.2 points in the same month the previous year.
“This upturn was led by real contributions, Employees Provident Fund (8.6 per cent), followed by the volume index of retail trade (3.6 per cent).
“Simultaneously, the monthly change in CI also climbed by 0.2 per cent with total employment of manufacturing being the main contributor to the increase (0.3 per cent),” it added.
Positive view
The Institute for Democracy and Economic Affairs (IDEAS) chief executive officer Tricia Yeoh said there is generally a positive view on the current administration, primarily because there has been greater political stability now.
“Political stability is fundamental in ensuring investor confidence as this contributes to economic viability.
“There is a sharper focus on fiscal consolidation, which we have seen given the removal of price ceiling on chicken, subsidy rationalisation for electricity and diesel, and talk of possible targeted subsidies from next year,” she noted.
Yeoh said investors have responded well to the Public Finance and Fiscal Responsibility Act, which was recently tabled and passed by parliament.
“This signals that the government will use specific measures and limits to manage its public finances, for instance, capping the debt-to-GDP ratio at 60 per cent (which is below the current ratio of 65 per cent).
“It has also released its slate of policy documents including the NETR, NIMP, Malaysia MADANI framework and the Mid-Term Review of the 12MP, which provides to the public its policy priorities,” she said.
Yeoh said what is needed at the moment is to translate these policy documents and strategies into action; the industry needs to know which sectors are going to be prioritised, for example, since energy and sustainability are mentioned as key policy areas.
“A sense of urgency in tackling our structural economic problems would also be required, including, for example, providing a clear roadmap on GLC (government-linked companies) transformation and divestment (if necessary), food security and the legislation of the Government Procurement Act (which helps combat corruption in procurement).
“Finally, increasing transparency and accountability in the government sector, as well as improving the quality of the public service, would improve investor confidence in the long run,” she added.
However, Malaysia’s economic growth may be affected moving forward should the Palestine-Israel conflict escalate further, involving other Arab countries in the region.
The Economy Ministry recently said that if the scale of the conflict widened, it would have a significant impact, especially in terms of rising oil prices and trade supply chain disruptions.
“This would have a knock-on effect on global inflation and economic growth in general, and Malaysia’s economic growth in particular,” the ministry said in a written answer during a recent Dewan Negara session.
The Economy Ministry said that if the conflict were contained to Palestine and Israel, there would not be any direct economic impact on the world in general as the two are not among the world’s top trading nations. – BERNAMA
