Malaysia's Economic Growth Could Surpass 5.0% Target In 2024 - MIER

Malaysia's economic growth may achieve or even surpass the 5.0% target in 2024, according to the Malaysian Institute of Economic Research (MIER).

In its monthly economic review for July 2024, MIER said the growth will be driven by political stability, macro fundamentals, foreign direct investment (FDI) inflow and realised investments.

The nation's gross domestic product (GDP) expansion will also be boosted by growth in the services sector, supported by domestic demand and tourist arrivals; construction and infrastructure; exports; healthy corporate earnings; labour market; stronger ringgit; and reforms and initiatives under the national masterplans.

“Domestic demand in 2024 is projected to grow around 6.0% year-on-year (y-o-y), supported by private spending (6.1%) and public spending (5.7%), while exports are expected to grow at 8.0% y-o-y.

“Growth will also be supported by services (5.3%), manufacturing (4.1%), construction (12.8%), agriculture (3.7%) and mining (2.8%)," it said.

MIER said that borrowing costs should also remain stable, adding that the overnight policy rate (OPR) is expected to remain at 3.0% throughout 2024.

It said Bank Negara Malaysia (BNM) would continue to focus on supporting economic growth while being vigilant on inflation.

"Although inflation was stable in the first half of 2024 (1H 2024), it could rise in 2H 2024 from domestic and external shocks, but it should remain at a manageable level," it said.

MIER also noted that foreign investors' appetite for local equities has increased, adding that the momentum is expected to continue in 2H2024 and is likely to extend into 2025.

Meanwhile, demand for domestic bonds is poised to remain strong in 2H2024.

“Apart from the potential rate cuts by the United States Federal Reserves, factors such as a stronger ringgit outlook, healthy domestic macro fundamentals, clear policy direction from the MADANI framework and the reaffirmation of our sovereign credit ratings by S&P and Fitch would continue to appeal to foreign investors.

“At the same time, a potential rating upgrade in 2025 is on the cards, catalysed by fiscal consolidation, better governance, strong economic fundamentals and public finances that include the federal debt-to-GDP ratio," it said.