KUALA LUMPUR, Nov 17 — RHB Investment Bank Bhd has maintained its 2023 gross domestic product (GDP) growth projection for the country at 4.3 per cent year-on-year (y-o-y), with rosier economic prospects expected in the fourth quarter 2023 (Q4 2023).

In a note today, it also projected that Malaysia’s growth to increase by 4.6 per cent y-o-y in 2024, underpinned by the external sector, including manufacturing and exports.

Domestic demand is expected to be driven by continued resilience in investment spending, spurred by the continuation of large-scale transport-related projects and business-friendly policies.

"Consumer spending momentum is anticipated to rise amid robust labour market conditions, while consumer sentiment is expected to improve.

"Higher necessities and discretionary spending by households are also observed in the Q3 2023 data,” it said in its Global Economics and Market Strategy note today.

On the external front, it said the early recovery of trade performance in Q4 2023 would positively impact manufacturing sector activities.

Solid recovery is expected by the first half (H1) of 2024 as downside risks dissipate; the global technology cycle downturn may be ending and there are early signs of recovery in China’s economy.

Further out, the external demand would be bolstered by continued resilience in the US economy and improved economic momentum in the ASEAN region by Q1 2024.

On the downside risks, it recognised that there may be some dampening effect on consumer spending due to subsidy rationalisation and the upward revision in services tax.

RHB Investment expects a broad-based recovery across the sectors on the supply side with a solid recovery expected in the manufacturing sector by 1H 2024.

"We expect the overnight policy rate (OPR) to be maintained at 3.00 per cent until end-2024 amid resilient growth prospects and uncertainties in the inflationary trajectory. No OPR cuts or hikes are expected at this juncture,” it said.

Meanwhile, another research firm, MIDF Research maintained its 2023 GDP growth forecast at 4.2 per cent for 2023, underpinned by a recovery in external trade from the Q4 2023 onwards.

"We expect Malaysia’s economic growth to pick up next year as we assume the trade recovery will continue, driven by a pick-up in demand for electrical and electronic (E&E) products and semiconductors,” it said.

In addition, employment and income growth, including government cash assistance will support domestic spending growth to continue until next year, MIDF said, adding that changes in government policies are the key downside risks to household spending, the research house said. — Bernama