MALAYSIA'S ECONOMY REMAINS RESILIENT AMID CONSUMER SPENDING, TECH UPSWING AND TOURISM

By Harizah Hanim Mohamed

Malaysia's economy remains fundamentally strong despite concerns over rising living costs and the weakening ringgit, largely driven by consumer spending, the tech upcycle, and increased revenue from the travel and tourism industry.

These positive indicators have raised optimism that the economy can expand by a commendable 5.0% in 2024 and grow more rapidly in the coming years.

Optimism surged after Malaysia recorded a satisfactory 4.2% growth in the first quarter of 2024 (1Q 2024), indicating robust economic performance despite widespread concerns over rising costs and a weaker currency.

Bank Negara Malaysia (BNM) has maintained its forecast for the economy to grow between 4.0% and 5.0% this year, encouraged by the strong 1Q 2024 growth.

Following that, Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid expressed optimism that economic growth could approach 5.0% this year despite concerns over higher living costs and a weaker ringgit.

He cited the Consumer Sentiment Index (CSI), which has remained below 100 points for five consecutive quarters since 1Q 2023, with the latest figure at 87.1 points in 1Q 2024, down from 89.4 in the fourth quarter of last year.

"However, spending bucked the trend and increased. Consumer spending grew at 4.7% in 1Q 2024 (4Q 2023: 4.2%). The economy should be able to grow at a healthy clip for the rest of 2024,” he told Bernama.

Mohd Afzanizam also attributed economic growth to the Employees Provident Fund's new option, Account 3, which allows account holders to withdraw up to 10% of their funds.

He opined that the EPF withdrawal would boost spending power in the second half of 2024.

“The perception that EPF Account 3 withdrawals have a muted impact on consumption is not accurate.

“While it might be smaller than the four pandemic-era withdrawals totaling RM145 billion, 10% could translate to between RM20 billion and RM30 billion,” he said.

Meanwhile, UOB Kay Hian Wealth Advisors head of investment research, Mohd Sedek Jantan, said the firm projected GDP growth of 4.4% in the first quarter and has been optimistic about the country's economy since November last year.

“The country's economic recovery is on the right track, driven by its trade-oriented economy.

“This recovery is supported by a bottoming out and a fragile rebound in the electronics cycle, along with continued growth in travel and tourism,” he said.

He emphasised that exports, particularly in electronics, are anticipated to recover modestly in 2024 after a challenging 2023 characterised by declines in shipments and manufacturing activity.

“This recovery is expected to benefit from a turnaround in global electronics sales, which are adjusting after the intense inventory destocking of 2023, aided by favourable base effects,” he added.

Regarding the overnight policy rate (OPR), Mohd Afzanizam said the central bank is striving to balance supporting economic growth while managing the risk of higher inflation.

“BNM is clear in its messaging that risks to inflation are on the upside, mainly due to policy changes such as fuel subsidies and higher input costs due to exchange rates. Thus, the possibility of a higher OPR cannot be ruled out.

"It will be very data-dependent, especially on how consumer spending prevails despite the challenges of higher living costs,” he added.