Consumer spending to slow in 2024!

The Socio-Economic Research Centre (SERC) has forecasted private consumption to moderate to 4.6% in 2024 from 5.3% in 2023, due to re-emergence of inflation risks, driven by new taxes and targeted subsidy rationalisation which is expected to take place in the second half of the year

The labour market is expected to maintain full employment conditions with an unemployment rate of 3.3% in 2024 and real wage is expected to grow by 5%, consumers will remain cautious with their spending, particularly on necessities.

SERC remains cautiously optimistic about Malaysia’s economic outlook in 2024 with a forecasted gross domestic product (GDP) growth of 4.5% supported by the continuous growth in domestic demand and a recovery in exports.

This comes within Malaysia’s official forecasted GDP of 4.0% to 5.0% in 2024. For the first nine months of 2023, Malaysia recorded a GDP growth of 3.9%.

SERC said export growth will be supported by a gradual improvement in global demand, a recovery from the downturn in the tech cycle, and an increase in demand for chips for electric vehicles, artificial intelligence and 5G technologies.

Furthermore, the research house has projected an inflation rate of between 2.8% and 3.5% due to subsidy rationalisation, on top of currency risks and uncertainties linked to supply-related factors such as global commodity prices and geopolitical tensions.

On the local currency, SERC has forecasted the ringgit to appreciate to the 4.40 level against the US dollar by the end of 2024.

The US Federal Reserve will likely cut the federal funds rate to a range of between 4.50% and 4.75% in the second half of 2024, while Bank Negara Malaysia may keep the overnight policy rate at 3% throughout the year. That reduces the differential.

If some of those MOUs signed in 2023 turns real, then there is a hope of higher FDI inflows. And if some politicians don’t go off the handle, investors may not be spooked to stay away!

Reference

Consumer spending to slow in 2024 as inflation may re-emerge; ringgit to strengthen against USD, SGD – SERC, Hee En Qi, The Edge Malaysia, 12/1/24