GDP Growth to Taper in 2023?

 The Government’s growth projection is 4% to 5% for 2023. This comes against the now-familiar backdrop of continued reliance on domestic demand. The Business Confidence Index by Malaysian Institute of Economic Research (MIER) dropped to 79.7 in 3Q23 from 99.8 of the corresponding three months, as export orders declined.

MIER reported that in terms of international trade, July and August saw an average monthly drop in exports of RM15.8bil and an average monthly drop in imports of RM18.6bil. Trade has decreased y-o-y in all major sectors, with the biggest drop in manufacturing – the sector that makes up 87% of total exports dropped by RM11bil from July 2022 to July 2023. Refined petroleum, a significant proportion of Malaysia’s export market, has dropped in value by 48%.

Image: https://moneyandmarkets.com

Socio-Economic Research Centre (SERC) is estimating Malaysia’s real GDP to grow moderately by 3%, almost at the same rate as the 2.9% posted for 2Q23. The Statistics Department’s advanced estimate of 3.3% for 3Q23, reflects a persistently challenging growth in the second half of 2023.  The continued drag from falling exports of electronics and electrical (E&E) products has dented the manufacturing sector, while consumers’ cautious discretionary spending continued to dampen the services industries. SERC believes the country’s full-year GDP growth for 2023 to come in at 3.8%.

Others believe GDP growth rate for 3Q23 could fall in the range of 2.7% and 3.3% to overall GDP growth for 2023 to be between 3.5% and 4%. Chances are it will be in the range of 3-3.5% for 2023.

The ringgit may trade in the RM4.60 to RM4.70 range against the greenback unless OPR is moved-up or Fed Fund rate drops. Neither is likely to happen!

Although much hope is placed on 2024, businesses are not bullish. Further, the CPI is likely to rise between 2.1% to 3.6% in 2024. So, tread cautiously and hope for the best!

References:

3% growth forecast for third quarter, Keith Hiew, The Star, 16 November 2023

Businesses, consumers turn more cautious, Ganeshwaran Kana, The Star, 16 November 2023