KUALA LUMPUR, May 14 — AmBank Group expects Malaysia’s gross domestic product (GDP) growth for the first quarter of 2024 (1Q 2024) to come in at 4.1 per cent, higher than the Department of Statistics Malaysia’s (DoSM) advance estimate of 3.9 per cent.

It noted that the DoSM estimate was calculated using the production method while AmBank used an expenditure approach model.

"Our model suggests that Malaysia’s growth in the said quarter could come in higher at 4.1 per cent due to continuous expansion in private consumption amid solid distributive trade sales performance and higher personal loans growth, higher investment and further improvements in Malaysia’s exports,” it said in a note today.

AmBank said although merchandise net exports are still in contraction mode, it believes the tide is turning in Malaysia’s favour as exports are no longer in the red in 1Q 2024 unlike in the past three quarters.

"We posit the still tepid inflation reading continues to complement the private consumption expansion,” it said.

During the quarter, it noted, domestic headline inflation averaged 1.7 per cent year-on-year (y-o-y), slightly higher than the fourth quarter of 2023 reading of 1.6 per cent y-o-y.

"Private consumption would have grown by 4.3 per cent y-o-y amid higher distributive trade sales, labour productivity and improvements in the tourism sector.

"On that note, we expect inflation to remain benign in the second quarter of 2024 as we are not seeing inflation misbehaving despite higher water tariffs and the increase in service tax by two per cent in 1Q 2024,” it said.

As for private investments, AmBank said it could grow by four per cent y-o-y as the labour market solidifies, along with healthy business conditions and continuous double-digit growth in loans related to fixed asset and commercial property purchases.

The financial services group forecast government consumption growing by 3.9 per cent y-o-y.

It noted the weak ringgit would benefit export proceeds but it would be set off by expensive and speedier import growth.

"We remain optimistic about Malaysia’s growth prospects this year, maintaining our current financial year 2024 GDP growth forecast at 4.5 per cent, falling in the middle-point of the official range of 4.0 to 5.0 per cent.

"We anticipate private consumption to notch up 5.4 per cent y-o-y this year, driven by the persistent strength in the labour market,” it said.

AmBank said the recently announced wage hike for civil servants, the deployment of the Employees Provident Fund Account 3, the progressive wage model, the possible revision of the minimum wage and continuous recovery in tourism will act as catalysts in turbo-boosting domestic demand in 2024.

"The continuous recovery in global trade could also bode well for Malaysia’s net exports later this year after it hit a 19-year low in 2023.

"The increasing upside risk to Malaysia’s growth will lay the foundation for revising our current forecasts should private consumption and net exports growth be sustained throughout the year,” it added.

The actual 1Q 2024 GDP figures will be released on May 17, 2024. — Bernama