KUALA LUMPUR: Malaysia’s gross domestic product (GDP) is expected to grow by between four per cent and five per cent in the second half of 2023 (2H 2023) and by 4.5 per cent for the full year, said the Socio-Economic Research Centre (SERC).
Executive director Lee Heng Guie said consumer demand would continue to be the key driver for the economy in the remaining months of this year, although the robust spending observed last year might not repeat.
Nevertheless, he noted that the high base effects in 2H 2022 would challenge the GDP performance in 2H 2023, with inflation risks remaining on the card and amid slower export growth due to a slowdown in global growth.
“Our tracking of high-frequency data has shown that the Malaysian economy has moderated in recent months, especially demand for our exports, while consumer spending has normalised.
“We are lucky that we still have a stable labour market condition, (in which) the unemployment rate is at about 3.5 per cent, (and) that helps to support and make sure consumer spending will not fall sharply but just grow at a slower pace,” he told a press briefing on Malaysia’s Quarterly Economy Tracker here today.
Lee expected consumer spending to grow between 4.5-5.0 per cent in the near-term while inflation averages below three per cent, most likely at 2.8 per cent.
He said subsidy rationalisation would likely take place after the six state elections are over, especially to address the oil price, which is currently trading at US$82 per barrel, slightly above the US$80 per barrel benchmark price set by the government in allocating subsidy under the Budget 2023.
He also opined that Bank Negara Malaysia would likely pause the overnight policy rate (OPR) at three per cent until year-end and maintain the current stance that is accommodative and supportive of economic growth.
“Any changes to the OPR is depending on how resilient the economy and consumer inflation behaves.
“I think the current level is just right (as) it will not significantly hurt the people. It is still supporting the economy but does not overburden on the business and the people,” he said, citing that the central bank would not cut the rate unless the country is in a big slowdown or perhaps on a sharp pullback in the demand side.
Lee stressed that the OPR should be net positive to the country – a situation when the OPR is above the inflation rate.
“If you are in a net negative for too long, then people will keep on spending and borrow for unproductive (activity), then imbalances (in the economy) will happen,” he said.
On other economic indicators, Lee said exports, which contracted 4.5 per cent in the first five months of this year, would decline by between five per cent and seven per cent for the full year on the back of subdued demand.
He said the global growth would continue in 2H 2023 but remain weak amid challenges, including Russia’s invasion of Ukraine, core inflation remaining high and the effects of higher interest rates.
The global central banks would keep their interest rates at a high level as long as possible until inflation comes down to the level of what they consider a “comfort zone”, where most advanced economies would prefer the two per cent horizon.
Lee reckoned that the anticipated recession in the United States might occur in the last quarter of this year or the first quarter of 2024. – BERNAMA
