RAM Ratings Services Bhd (RAM Ratings) said that Malaysia’s economic growth will stay weak in 2023 in a recently released report.
Factors such as soft global demand and other headwinds will continue to challenge the economic momentum in the second half of 2023 (H2 2023) with gross domestic product (GDP) projected to decelerate to 4% – 5% from 8.7% the previous year.
The credit rating agency noted that GDP growth has slowed down to 4.2% year-on-year (y-o-y) in the first half of 2023 (H1 2023) from 10.4% in H2 2022 due to a slowed global trade and a semiconductor downcycle bit into exports.
In H1 2023, the volume of exports has also declined by 6.4% y-o-y and is attributed largely to a high base effect.
“Domestic demand, the key driver of economic growth, was also softer at 4.5% in 1H 2023 compared to 9.9% in the second half of last year, as spending behaviour normalised.” the ratings agency said in a statement.
There are, however, bright spots on the horizon as RAM Ratings expects the economy to eke out growth of 4.5% to 5.5% in 2024.
“The labour market continues to stay robust, powering domestic demand. Recent data also indicates tentative signs of the current electrical and electronic (E&E) downturn bottoming out, potentially lifting exports next year.” The report states.
A resolution to the labour shortage issues could act as an additional impetus for growth in sectors such as agriculture and construction. Additionally, a soft landing for the US economy could lead to a less severe global slowdown.
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