Malaysia’s gross domestic product (GDP) growth is expected to be around 4% to 5% in 2023, amid global headwinds such as inflationary pressure and the ongoing Russia-Ukraine war which may drag the country’s nascent export recovery, according to RAM Rating Services Bhd.
In comparison, Malaysia recorded a high GDP of 8.7% in 2022, supported by the recovery of private spending and investment, a decrease in unemployment and the strengthening of the ringgit.
Nevertheless, Malaysia cannot escape the ripple effects from slower global economic growth this year, as there are a lot of uncertainties, said RAM Ratings head of economics research Woon Khai Jhek at the Malaysia Outlook Conference 2023, titled Malaysia's Turning Point: Opportunity Amidst Volatility, hosted by the Institute for Democracy and Economic Affairs (IDEAS Malaysia).
“However, considering the external environment, we believe that the 4-5% [growth] forecast is respectable [given] some of the downsides that we are facing.
“There is [also] hope that there will be a soft landing in the US interest rate hike, which will provide some benefits to the overall global economic growth. Another point is China’s reopening,” he explained.
“[Nonetheless,] the country has a broad-based diversified domestic economy. I think the E&E (electrical and electronics) sector will continue to be the key growth [for Malaysia's exports] going forward,” he said.
Commenting on Bank Negara Malaysia (BNM)’s decision on Thursday to maintain the overnight policy rate (OPR) at 2.75%, Woon said there is a possibility of further rate hikes by the central bank by year-end.
"We still expect BNM to continue to normalise the interest rate. We estimate the OPR [to be] at 3% by the end of this year," he said.
Source: The Edge Markets