The Malaysian economy will moderate in 2023 amid challenging external conditions and slowing domestic demand, economists said on Thursday.
The Maybank Investment Bank Research said in a report that it expects Malaysia’s full-year growth to moderate to 4 per cent in 2023 from 2022’s growth forecast of 8 per cent, mainly reflecting moderation in domestic demand, Xinhua news agency reported.
The research house sees slower growth in private consumption next year as pent-up spending from full economic re-opening dissipates, compounded by the effects of high inflation and high interest rates on cost of living and real disposable income.
It also sees moderation in public consumption growth in line with the lower government operating expenditure allocation in Budget 2023.
In addition, it said the outlook of slower global economic growth results in exports and imports of goods and services slumping.
Meanwhile, MIDF Research foresees Malaysia’s gross domestic product (GDP) growth to moderate to 4.2 per cent for 2023 mainly due to deceleration in external trade performances as a result of slower global demand.
“We foresee the global economy to experience slowdown rather than recession for next year. Due to higher interest rates and elevated inflationary pressure, demand conditions in the United States and the European Union will dampen next year,” MIDF Research said in the report.
According to the research house, Malaysia’s real exports growth is projected to slow to 2.8 per cent from the 2022 growth estimate of 12.5 per cent, partially supported by improving services exports given the expectation of a more robust tourism activity.
However, on the trade of goods, it believes Malaysia will continue to benefit from commodity exports especially palm oil, petroleum and liquefied natural gas (LNG) as the average prices of crude palm oil (CPO) and Brent crude oil are forecasted to stay elevated at 3,500 ringgit ($794) per tonne and $96 per barrel for next year.
MIDF Research is also optimistic that the Malaysian domestic economy will be fueled by continuous upbeat consumer spending, further improvement in tourism-related activities and revival of infrastructure projects.
Affin Hwang Investment Bank, on the other hand, said Malaysia’s open economy will be negatively impacted by global growth deceleration and have hence recently lowered its 2023 GDP estimates to 3.7 per cent from 4.7 per cent previously.
While a global growth deceleration will impact Malaysia, the research house is of the view that a recession is unlikely because of its healthy labour market conditions as well as a steady recovery in tourism related industries.
It, however, opined that Malaysia may have to deal with a surge in cost of living, should there be a firm commitment from the government to strengthening its fiscal position and addressing sovereign rating agencies concerns.
UOB Kayhian also foresees Malaysia’s GDP growth to halve to 4 per cent in 2023 as domestic consumption slows.
“The GDP growth outlook is highly dependent on the government’s ability to ensure a manageable cost of living for the people by maintaining subsidies,” the research house said in a report.
RHB Research also said in its recent report that Malaysia’s growth outlook for next year remains cautiously optimistic, supported by resilient domestic demand.
It also expects private consumption to remain the main driver of economic growth for the year, underpinned by stable labour market conditions, improvement in overall incomes supported by a vibrant services sector, and continued policy support by the government.
Despite the consumption recovery, it noted that rising living costs remain an problem as food prices remain elevated amid supply chain issues.
The research house maintained its 2023 GDP growth forecast of 4.5 per cent, in line with the Malaysian government’s forecast of 4 per cent to 5 per cent.