Malaysia's GDP is expected to expand by over 4 percent this year, driven mainly by trade and investments. Southeast Asia's third-biggest economy is also focusing on low carbon technology and extending targeted subsidies to promote sustainable and inclusive development.
The country's GDP rose by 3.9 percent in the first three quarters of last year. The government has yet to announce the GDP growth rate for this year, but Prime Minister Anwar Ibrahim said during the finance ministry's assembly on Tuesday that economic indicators last year were "positive and encouraging", and that the GDP growth recorded from January to September was in tandem with the targeted 4 percent for 2023.
Alicia Garcia-Herrero, chief economist for Asia-Pacific at Natixis, is optimistic that Malaysia's GDP this year can surpass that of 2023, due to an influx of investments from China.
"I think this is a very good time for Malaysia," she said, adding that most of the Chinese investments went to the semiconductor and electric vehicles manufacturing sectors. The labor force scarcity in Vietnam is attracting more foreign investors to go to Malaysia, she added.
China is among the biggest sources of foreign direct investment for Malaysia. In the first nine months of last year, China invested a total of 11.6 billion ringgit ($2.5 billion) in the country, according to the Malaysian Investment Development Authority.
Geoffrey Williams, professor and dean of the Institute of Postgraduate Studies at the Malaysia University of Science and Technology, complimented Malaysia's stable monetary policy and expected the overnight policy rate to remain at 3 percent for the year.
"There was a structural shift in underlying growth in Malaysia due to the shock of the COVID-19 pandemic, which caused a lot of damage and scarring (to the economy). This lowers the underlying growth potential to between 3 and 4 percent, which is what we expect in 2024," he said.
He also said a better fiscal position with only slightly higher spending, higher revenue and a lower deficit can support growth.
GDP growth
Maybank Investment Bank sees Malaysian GDP to be firmer in 2024, with growth projected at 4.4 percent. The expansion will be underpinned by resilient consumer spending, sustained private and infrastructure investment and recovery in trade, services and manufacturing industries.
In its annual economic outlook, Maybank said this year should be a takeoff year for Malaysia's medium-to-long-term economic transition as outlined in blueprints, master plans, road maps and legislation that the government had announced last year. These plans include the National Energy Transition Road-map, New Industrial Master Plan and the Madani Economy, an economic framework that aims to transform Malaysia into one of the 30 biggest economies in the world.
Anwar, who is also the finance minister, said in his Tuesday speech that the inflation rate dropped from 4 percent in November 2022 to 1.5 percent in November last year. But he said consumer prices were still increasing and that implementing targeted subsidies would allow the government to channel more cash aid to those in need, the New Straits Times reported.
Serina Abdul Rahman, lecturer on Southeast Asian Studies at the National University of Singapore, said Malaysians, especially those in rural areas, "want to see these things implemented and fast, such as (targeted) petrol subsidies. But the need to re-register under a new system is difficult for poor rural folk".
