Malaysia’s economic outlook brightens for Q2 2024, economists say Madani Economy driving growth

KUALA LUMPUR, Aug 15 — Malaysia’s economic performance is expected to improve in the second quarter of this year (Q2 2024) with increases in household spending, production, and investment driven by market confidence and positive sentiment with the implementation of the Madani Economy.

University of Science and Technology economist Prof Emeritus Barjoyai Bardai said the gross domestic product (GDP) is projected to grow by 5.8 per cent in Q2 2024 versus 4.2 per cent in Q1 2024, based on a strong foundation along with price stability in the market with the current two per cent inflation rate.

“The most important (performance) we will see is the increase in household spending, due to the improved household confidence.

“Additionally, economic sentiment is also supported by an increase in exports and imports in the (first quarter) as well as a 3.3 per cent unemployment rate,” he told Bernama in a recent special interview.

Bank Negara Malaysia is expected to announce the Q2 2024 GDP on Friday.

In Q1 2024, exports rose by 2.2 per cent to RM362.41 billion, imports were up by 13.1 per cent to RM328.19 billion.

On the right track

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid expects the GDP to grow by 5.8 per cent in Q2 2024 versus 4.2 per cent in Q1, underscoring that the government is on the right track in driving the country’s economic growth in line with the Madani Economic framework.

He opined that the positive growth would be supported by commendable investment activities with RM83.7 billion approved investments recorded in various fields in Q1 2024, representing a 13 per cent increase from RM74.1 billion in the same period last year.

The manufacturing sector saw a substantial increase to RM43 billion in the Q1 2024, a whopping 174.9 per cent compared to the Q1 2023.

“The investment data indicates that the country is in the right position to spearhead further reforms as this will create more fiscal space for the government to spend on productive sectors.

“Also, it gives a sense that the government is responsible in their finances which would translate into market confidence in respect to the country’s sovereign rating and earnings potential,” he reckoned.

In Q1 2024, Malaysia’s approved domestic and foreign investments stood at RM36.7 billion and RM47 billion, respectively.

Recent policies influencing economic confidence

According to the Association of Chartered Certified Accountants (ACCA) in a statement, the Madani Economy framework, which includes the New Industrial Master Plan (NIMP) 2030 and the National Energy Transition Roadmap (NETR), has provided a robust foundation for economic growth.

The statement said Malaysia has introduced several structural changes under Budget 2024, including the implementation of a capital gains tax and measures to enhance tax compliance through e-invoicing; these reforms are expected to support fiscal consolidation and economic stability.

“Malaysia’s economic confidence aligns with global trends, showing resilience and growth despite global economic uncertainties,” it said.

Malaysia’s Business Confidence Index rose to 94.30 points in Q1 2024, up from 89 points in the previous quarter, reflecting a positive outlook among businesses, driven by strong domestic demand and supportive government policies, ACCA said recently.

Positive FBM KLCI-GDP relations

Mohd Afzanizam said the FTSE Bursa Malaysia KLCI (FBM KLCI) was up quite substantially of late with July net purchases of equities and bonds totalling RM1.4 billion and RM7.8 billion, respectively, by foreign investors.

Share of foreign ownership in Malaysian Government Securities and Government Investment Issues also increased to 34.2 per cent and 9.3 per cent, respectively, in July from 33.3 per cent and 9.2 per cent in the previous month, he said.

“We shall expect the GDP to improve when investments go up. There would be more application of high technology in production processes, which would translate into higher demand for highly skilled employees who typically command a better pay scale. This promotes productivity and knowledge, ultimately accelerating GDP expansion,” he added.

The Madani Economy framework, announced by Prime Minister Datuk Seri Anwar Ibrahim on July 26 last year, comprises seven key indicators as medium-term targets to be achieved within 10 years.

The indicators are as follows: Malaysia to be among the world’s top 30 economies, top 12 in the Global Competitiveness Index, labour income constitutes 45 per cent of total income, women participation in the labour force reaches 60 per cent, top 25 in Human Development Index, top 25 in Corruption Perception Index and fiscal sustainability with a fiscal deficit of three per cent or lower. — Bernama