Malaysia’s economy is expected to overcome challenges in the first half of 2023 with support from strong households, stable economic fundamentals, and improved outlook. Experts believe Malaysia is on track to achieve its GDP target of 4-5% for 2023.
External factors that impacted the economy in the first half of 2023, such as the US Federal Reserve’s monetary stance, the US dollar, and China’s disappointing rebound, are expected to benefit Malaysia in the second half of the year.
Domestic consumption remains a key driver of economic growth. Bank Muamalat Malaysia’s chief economist Dr Mohd Afzanizam Abdul Rashid stated that Malaysia’s economy showed resilience in the first half of 2023, supported by a healthy labor market, increased tourist arrivals, and higher vehicle sales.
Dr. Rashid also mentioned that the labor market has improved, with the number of unemployed individuals decreasing from 826,100 in May 2020 to 584,600 in May 2023. He believes that the domestic demand will play a crucial role in maintaining Malaysia’s growth momentum.
Additionally, the automotive sector saw an 11.7% year-on-year increase in total industry volume for the first five months of 2023. Airport passenger traffic also rose significantly by 102.2% between January and May of this year.
Bank Negara Malaysia governor Datuk Abdul Rasheed Ghaffour stated that the central bank is maintaining its GDP growth forecast for the year, as domestic demand remains resilient.
Inflation in Malaysia is looking benign, according to Manulife Investment Management chief investment officer Murray Collis. He believes that Asian central banks are in a good position to hold monetary policy steady or even adopt an accommodative stance.
Manulife Investment Management’s global macro strategy co-head Sue Trinh mentioned that the rotation of spending from goods to services has helped support economic activity. After four consecutive rate hikes in 2022, Bank Negara Malaysia raised the overnight policy rate by 25 basis points to three percent in May 2023, but it is expected to keep rates unchanged in the near future.
Chinese policymakers are expected to implement focused stimulus measures to revive consumer and business confidence, benefiting Malaysia as China is its largest trading partner. Standard Chartered’s global chief investment officer Steve Brice stated that the expected recession in the US has been delayed, leading to potential interest rate cuts by the Fed. Investors may turn to Asian assets, including Bursa Malaysia, given their cheaper valuation and undervalued markets.
If the US achieves a soft landing, Malaysia could benefit through the commodity channel, leading to a recovery of the ringgit and increased stock flows. Foreign funds have been net buyers in Malaysia, with a significant increase in the first half of 2023.
Market players anticipate a pause in interest rate hikes by the Federal Open Market Committee, and the US dollar is expected to weaken in the coming months, providing a boost to Asian assets and currencies.
Overall, Malaysia’s economy has shown resilience in the face of global challenges, and experts are optimistic about its growth prospects for the rest of 2023.
Credit: The Star : News Feed
