The World Bank on Monday maintained its forecast for Malaysia’s economy to grow 4.3% this year, as household spending accelerates amid moderate inflation, but flagged narrow fiscal space and potential downside from external risks.
Malaysia’s gross domestic product (GDP) will likely expand 4.3% this year, the multilateral agency said in its East Asia and Pacific April 2024 Economic Update report, unchanged when compared to its October 2023 forecast.
For 2025, the World Bank expects the country's economic growth pace to pick up slightly to 4.4%.
“In 2024, growth is expected to pick up, as the risk of a global recession recedes,” the World Bank said.
“The recovery in the tech cycle, which could boost electric and electronics exports, could also have positive spillovers to growth.”
The World Bank's forecast is in line with Malaysia's official projection of growth of between 4% and 5% in 2024, versus a 3.7% expansion in 2023.
World Bank East Asia and Pacific chief economist Aaditya Mattoo said Malaysia's growth will be anchored by domestic demand, while it also stands to benefit from the recovery in the export market.
Private consumption is expected to grow by 5.2%, from 4.7% in 2023, driven by supportive labour market conditions and continuous household income support measures.
In addition, gross exports are projected to rebound to 4.8%, from a contraction of 7.9% last year, in tandem with the expected recovery in global trade.
“Given Malaysia’s exposure to China, the slowing growth in China is going to be a problem.
“But in general, Malaysia is going to benefit from what is referred to as the technology cycle, which boosts electrical and electronics exports, and it is already benefiting from the significant relocation of semiconductor production from China,” Mattoo said.
Acknowledging that China is currently facing challenges as it tries to rebalance its economy and improve the quality of its growth, Mattoo expressed optimism that China’s growth will be"sustained and higher" once it negotiates these difficult transitions.
Earlier, Mattoo in a presentation shared that the developing East Asia and Pacific region is growing faster than the rest of the world, but slower than it was before the Covid-19 pandemic.
While recovering global trade and easing financial conditions will support economies in the region, increasing protectionism and policy uncertainty will dampen growth, he said.
"The region is growing faster than most other regions of the world. But most countries in the region today are growing slower than before — outperforming but underachieving with respect to its own potential," Mattoo said in a virtual briefing, in conjunction with the release of the report.
The World Bank defines developing East Asia and Pacific countries as Cambodia, China, Indonesia, the Lao People’s Democratic Republic, Malaysia, Mongolia, Myanmar, Papua New Guinea, the Philippines, Thailand, Timor-Leste, Vietnam, and the Pacific Island countries.
According to the report, the region's growth is projected to ease to 4.5% in 2024, from 5.1% last year. But excluding China, growth in developing East Asia and Pacific countries is projected to pick up to 4.6% this year, up from 4.4% in 2023.
In contrast, growth in China is projected to moderate to 4.5% this year, from 5.2% in 2023, as high debt, a weak property sector, and trade frictions weigh on the economy.
Source: Bernama