KUALA LUMPUR, Feb 13 — Kenanga Research has revised its 2023 gross domestic product (GDP) growth upwards to 4.7 per cent from 4.3 per cent earlier as domestic demand is expected to remain resilient, supported by targeted expansionary fiscal measures, the impact of post-Covid normalisation, China reopening, as well as the prospect that global economic slowdown may not be as severe as anticipated.

The research house said this year’s GDP is expected to grow moderately due to normalisation in domestic economic activity, the impact of tighter financial conditions brought by the global central banks and the prospect of global growth slowdown amid elevated geopolitical risks as well as volatile commodity prices.

"However, domestic growth would remain supported by further improvement in the domestic labour conditions and a potential rise in wage growth, with the unemployment rate expected to return to its pre-pandemic level of 3.3 per cent this year.

"This will be further bolstered by the resumption and realisation of multi-year government projects as well as a sustained increase in tourist arrivals,” it said in a research note today.

Kenanga Research said tourist arrivals expanded 12.9 per cent month-on-month, reaching 1.2 million in September 2022, and are expected to gradually increase going forward due to further resumption of international tourism.

"Likewise, our forecast remains subject to multiple risks, mainly stemming from the external side, such as the development of the Russia-Ukraine tensions and Sino-American relations, as well as the prospect of recession in several major economies,” it said.

In view of the external headwinds and diminishing base effect, Hong Leong Investment Bank (HLIB) has also maintained its expectation for Malaysia to grow at a more moderate pace of 4.0 per cent this year.

"Nonetheless, China’s recent reopening is anticipated to help push the recovery in tourist arrivals and lend some support to export growth. Domestic demand is also expected to continue to support growth, albeit at a more moderate pace, amid the continued gradual recovery in the labour market,” it said in a separate note.

For 2023, HLIB said Bank Negara Malaysia reiterated that the Malaysian economy would continue to be supported by domestic demand, underpinned by continued improvements in the labour market and the realisation of multi-year investment projects.

"Risks to the outlook, however, remain titled to the downside, stemming from weaker global growth, tighter financial conditions, re-escalation of geopolitical tensions and supply chain disruptions,” it said.

Meanwhile, CGS CIMB Research forecasted GDP growth of 4.4 per cent for Malaysia in 2023 in the face of weak demand domestically and externally.

"Private consumption looked weak in the fourth quarter of 2022 amidst the rising cost of living. However, the unemployment rate is trending downward and should reach the pre-pandemic level of 3.3 per cent in 2023.

CGS CIMB said that fewer restrictions on hiring foreign workers should ease the labour shortage in the agriculture industry.

"We expect the revised Budget 2023 (on Feb 24, 2023) to provide guidance on the government’s strategy for tackling the rising cost of living,” it added. — Bernama