RAM Ratings: Malaysia’s GDP to slow to 5% in 2023

KUALA LUMPUR: RAM Ratings projected Malaysia’s gross domestic product (GDP) growth to slow to between four and five per cent in 2023 from an estimated 8.2 per cent in 2022.

The rating agency said global economic slowdown is anticipated to dampen Malaysia’s exports while the still notable price pressures and tighter monetary conditions might impact domestic consumption.

“That said, domestic demand is expected to drive the economy as businesses and households climb out of the lingering shadows of the COVID-19 pandemic,” it said in a statement today.

It said Malaysia’s broad and diversified base would cushion intensified headwinds to growth in 2023.

RAM Ratings said the economic growth would also be supported by stronger labour market conditions next year with the average unemployment rate projected to fall to 3.5 per cent from an estimated 3.8 per cent in 2022.

It said the resolution of issues related to foreign workers and supply chains should also provide additional impetus for growth.

Meanwhile, it said sharper-than-expected deterioration in the global economy and/or domestic inflation are key downside risks for next year.

On the fiscal side, the rating agency said the more moderate commodity price levels, and in turn the related subsidy expenditure, might keep the fiscal deficit contained within 5.4 per cent of GDP from an estimated of 5.8 per cent in 2022.

“This estimate is still subject to the final formulation of subsidy rationalisation plans for key items including petrol and electricity tariffs,” it said.

It said with the status quo, the current fiscal space remained fairly tight with government debt projected to reach RM1.1 trillion in 2023 or 62.4 per cent of GDP and debt servicing at a significant 16.9 per cent of total projected revenues for 2023 from an estimated 15.1 per cent in 2022. – Bernama