Analysts are optimistic that the domestic economy will be fueled by continuous upbeat consumer spending, further improvement in tourism-related activities and revival of infrastructure projects. — Bernama photo
KUCHING: Analysts are optimistic that the domestic economy will be fueled by continuous upbeat consumer spending, further improvement in tourism-related activities and revival of infrastructure projects.
Considering external headwinds and tightening monetary policy in many economies, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) foresees Malaysia’s gross domestic product (GDP) growth to moderate to 4.2 per cent for next year.
“The softening growth is mainly due to deceleration in external trade performance as slower global demand is highly anticipated,” MIDF Research said.
“The normalised GDP growth next year is also attributable to the absence of low base effect, which also boosted growth this year.
“On the other hand, we are optimistic that domestic economy to be fueled by continuous upbeat consumer spending, further improvement in tourism-related activities and revival of infra projects.”
According to MIDF Research, moving into 2023, supply-push factors on inflation are expected to soften among others underpinned by appreciation of US dollar-ringgit, moderation in food prices, further easing in global supply chain pressure and relatively lower commodity prices.
“However, Malaysia’s inflation outlook remains cloudy for next year, awaiting the post-15th General Election (GE15) government’s approach on fuel-subsidy mechanism.
“If the new government keeps status quo on the fuel subsidy, hence headline inflation is expected to hover between 2.3 to 2.5 per cent for 2023. If the subsidy mechanism abolished entirely, headline inflation could touch 10 per cent, while gradual increase in domestic retail fuel prices would result into four to five per cent for next year.”
Looking ahead, MIDF Resesarch forecast private consumption to expand by 6.6 per cent in 2023.
“Malaysia’s consumer spending is expanding strongly as reflected in retail trade sales growth of 23.2 per cent year on year (y-o-y) in the first eight months of current year 2022 (8MCY22).
“Underpinned by positive real wage growth, improving labour market, stable inflationary pressure and fiscal incentives, private consumption is projected to grow by 6.6 per cent for 2023.”
The research arm believed the pent-up demand will continue provided that no significant change in overall inflationary pressure which could erode purchasing power.
“With the reopening of international borders, tourism activity will improve modestly yet still below pre-pandemic levels.
“Consumer spending in Malaysia to stay steady amid stable inflation and jobless rate is set to decline further to 3.5 per cent next year, among others thanks to sustained economic recovery in post-pandemic period as well as the return of non-citizen workers to Malaysia’s job market.”
In addition, the research arm anticipated that Bank Negara Malaysia’s (BNM) overnight policy rate (OPR) will be fully normalised at three per cent in the early part of 2023, creating a monetary space for the central bank in the event of worse-than-expected global economic slowdown.