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Home MIER: Malaysia’s GDP to grow between 4.3-4.6% in 2024, with business conditions index starting to recover MIER: Malaysia’s GDP to grow between 4.3-4.6% in 2024, with business conditions index starting to recover

By February 8, 2024February 9th, 2024No Comments

The Malaysian Institute of Economic Research has forecast that gross domestic product will expand moderately within the range of 4.3% to 4.6% this year, driven by resilient domestic demand and stable labour market conditions.

KUALA LUMPUR (Feb 8): The Malaysian Institute of Economic Research (MIER) forecasts that the Malaysian economy, as measured by the gross domestic product (GDP), will expand moderately within the range of 4.3% to 4.6% in 2024, driven by resilient domestic demand and stable labour market conditions.


The confidence in the manufacturing sector has also started to recover in the fourth quarter of 2023, with the business conditions index (BCI) increased by 9.3 points on a quarter-on-quarter (q-o-q) basis, reaching 89 points, and 3.1 points on an annualised basis, to 85.9 points, said MIER.


However, it is noteworthy that the index for 4Q2023 still falls below the 100-point threshold.


“Business sentiment in the fourth quarter of 2023 reflects a lower level of optimism. Both domestically and globally, various factors have contributed to this subdued outlook, challenging the economic landscape.


“Companies are facing an urgent need to proactively increase their sales and domestic orders. As businesses grapple with uncertainty, policymakers and industry leaders must collaborate to address the root causes of the… subdued sentiment,” stated MIER in its 4th Quarter 2023 survey reports.


The institute noted that for the BCI to recover, strategic interventions, adaptive policies and proactive measures are essential, to build confidence, stimulate economic activity and pave the way for a more optimistic business environment in the coming quarters.


While BCI started to recover in 4Q2023, manufacturing companies’ sales index dropped 9.2 points q-o-q and 10.3 points year-on-year (y-o-y), reaching 34.7 points. During the quarter, 50% of the respondents reported poor sales, 31% reported satisfactory sales and only 19% reported good sales.


On a positive note, foreign demand surged by eight points to 39.3 points in 4Q2023, stated MIER. The recovery in export orders is being propelled by the beverage industry, the non-metallic minerals sector, other manufacturing, as well as the repair and installation sector.


“The 29% increase in export orders is favoured by the fact that monetary policy in major economies is no longer being tightened, and stimulus measures are beginning to take effect. For 21% of companies, export orders remain unchanged, a notable improvement from the 38% reported in the previous quarter,” the institute noted.


On the other hand, the proportion of companies whose foreign orders declined remained stable at 50%. This is particularly evident in chemical and pharmaceutical products, electrical equipment, motor vehicles, and transport equipment.


Additionally, the country’s growth momentum and export performance may receive a positive boost if there is a recovery in the global semiconductor industry, said its head of research Dr Shankaran Nambiar in a statement on Wesnday.


“An improvement in global electronics and integrated circuit sales may create positive spillover effects for Malaysia’s electrical and electronics sector by increasing production and stimulating export performance.


“However, the government must look to temper the downside risks stemming from the sluggish outlook in China’s economy [due to weak domestic activity, a slump in the property market, and persistent deflationary pressures], increasing geopolitical uncertainties in the Middle East, a surge in financial stress in developing economies [due to high interest rates worldwide], and climate change.


“These are potential risks that may hinder Malaysia’s 2024 growth prospects,” stressed Shankaran in the statement.


Meanwhile, Malaysia is set to unveil the 4Q2023 GDP figure next Friday (Feb 16). According to MIER, it expects the country’s GDP to have grown modestly at 3.6% for 4Q2023 leading to a full-year growth of 3.9% in 2023, despite weak external demand and ringgit depreciation.


Touching on inflation, MIER said annual inflation rate is expected to range between 2.5% and 3% for 2024.


However, the outlook is highly subject to changes in domestic policy on subsidies and taxes, Bank Negara Malaysia’s monetary policy, movements in global commodity prices, and unanticipated shocks arising from geopolitical uncertainties in the Middle East.


The labour market outlook, on the other hand, remains favorable given the significant number of jobs to be created across the economic sectors, according to MIER.


The infrastructure development incentives under the 2024 Budget, including Pan Borneo Sabah Phase 1B, flood mitigation packages, Penang LRT, Sabah-Sarawak Link Road, and LRTS reinstatement, are expected to generate new jobs within the construction sector, as well as indirect jobs in the other economic sectors through backward linkages, it said.


“Moreover, the 5G rollout incentive under the 2024 Budget is expected to boost the tech job market by generating new job opportunities (ie technicians, engineers, and software developers) in both services and manufacturing sectors.


“In view of these incentives under the 2024 Budget, MIER forecasts the labour force participation rate for 2024 to be in the range of 70% to 72%, and the unemployment rate to moderate further within the range of 3.1% and 3.3%,” it added.


By Syafiqah Salim /

Edited By Kamarul Azhar Azmi

This article first appeared in The Edge aMalaysia on February 8, 2024