On: February 20, 2024 In: Blog, Fixed Income, Knowledge Centre

Malaysia 4Q23 GDP Review

16 February 2024

  • Malaysia’s 4Q23 Gross Domestic Product (GDP) grew by 3.0% YoY, lower than the previous advance estimate at 3.4% YoY. This puts Malaysia’s full year 2023 growth at 3.7%, missing the 4% official forecast by the Ministry of Finance. Nevertheless, Malaysia’s growth remained one of the fastest among its ASEAN peers (Singapore: 1.1%; Thailand: 1.8%; Indonesia: 5.05%).
  • Weak external demand was offset by resilient domestic spending. External demand was largely weighed down by tight monetary policies across most advanced economies and weaker global trade. Malaysia’s manufacturing sector remained soft as exports from the electrical and electronics (E&E) industry saw significant contraction. However, this was largely offset by continued strength in household spending underpinned by robust domestic labour market conditions. Evidently, unemployment rate in Dec’23 was low at 3.3% while participation rate was at record high of 70.2%, mainly driven by hiring in the services sector.

Opus View:

  • Growth in 2024 will be driven by recovery in E&E exports. Moving forward, the median consensus growth forecast for 2024 is at 4.5%. We look to the recovery in the semiconductor cycle and increasing tourist arrivals as the key external catalyst. We opined that domestic consumption will continue to be supported by strong employment and wage growth, especially driven by the implementation of multi-year projects from both foreign and domestic direct investment pipeline. However, we are cognizant of the potential offset from the moderation in discretionary spending following the government’s subsidy rationalisation exercise expected in 2H’24.
  • Narrative of rate cuts supportive of bond market. While the timing and the quantum of rate cuts of the US Fed Fund Rate is still debatable and data dependent, the narrative of rate cuts commencing is supportive of the bond market. The local Malaysian Government Securities (MGS) market will also benefit from this narrative even though we expect the Overnight Policy Rate (OPR) set by Bank Negara Malaysia (BNM) to remain at 3.00% in 2024.

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