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Malaysia: Economy to grow at moderate pace of 4% this year
KUALA LUMPUR: Malaysia’s economy is projected to grow at a more moderate pace of 4% this year, with domestic private sector spending is expected to be the main driver of growth amid an expected slowdown in external demand.
According to the World Bank, private consumption is forecast to expand at a slower but still relatively robust rate of 6.7% in 2023, sustained by the ongoing improvement in labour market conditions as well as ongoing household income support from the government.
“Gross fixed capital formation is projected to increase by 4.2% in 2023 (2022 estimate: 5.3%), reflecting the continued flows of capital investments in the private and public sectors,” it said in its latest Malaysia Economic Monitor report entitled ‘Expanding Malaysia’s Digital Frontier’ released yesterday, Bernama reported.
According to the report, capital expenditure in the private sector is expected to continue to be driven by ongoing and new multi-year investments in the technology-intensive manufacturing and services sectors.
“Capital spending by the government is expected to be mainly directed towards the upgrading of public infrastructure and amenities including the East Coast Rail Link, Light Rail Transit 3, Mass Rapid Transit 3, the Johor Baru-Singapore Rapid Transit System, Sarawak-Sabah Link Road Phase 2, and Trans Borneo Highway,” it said.
Meanwhile, as the global environment becomes less supportive, World Bank said trade growth is expected to moderate in 2023, with Malaysia’s export growth projected to slow to 2.2%, in line with softening global growth prospects and weakening international trade momentum.
Similarly, it said import growth is projected to moderate to 2.1% in 2023 (compared to 15.3% for the 2022 estimate) reflecting the slower import growth across consumption, intermediate, and capital goods.
The report also stated that global growth is forecast to decelerate sharply to 1.7% this year, from 2.9% estimated for 2022, reflecting the synchronous policy tightening, worsening financial conditions and continued disruptions from the Russia-Ukraine conflict.
“For advanced economies, growth is projected to slow markedly to 0.5% (2022: 2.5%) as central banks continue to tighten monetary policy to contain inflationary pressures.
“In the East Asia and Pacific region, growth is projected to firm to 4.3% in 2023 (2022: 3.2%) as the easing of pandemic-related restrictions allows activity in China to pick up,” it said.
Excluding China, it said growth is projected to moderate to 4.7% in 2023-2024 as continued recovery in domestic demand and belated recovery in tourism and travel offset weaker growth of goods exports. — Bernama