Octa insights: analysis and outlook for Malaysia's economic growth in the first quarter of 2024

Thus, the economy grew by 4.2% at the end of the first quarter of 2024, beating the 3.9% growth forecast. By comparison, in 2023, the economy grew by 3.7%, with a sharp drop from a 22-year high of 8.7% in 2022.

Robust domestic demand, increased exports, investment and consumption drove this growth. Exports grew by 2.2% year-on-year, pushed by increased demand for electronics, palm oil and other goods.

In addition to the sustained expansion of the manufacturing and services sectors, the labour market is also doing quite well. The unemployment rate is expected to improve to 3.2% (2023 — 3.4%), supporting the growth trajectory significantly.

Despite the positive momentum, BNM is apparently not yet ready to revise its economic growth forecasts for 2024—the forecast is unchanged at 4.0%- 5.0%.

'A softening labour market, weak currency and weak external demand are likely to weigh on economic activity in the coming quarters,' commented Kar Yong Ang, the Octa broker's financial market analyst.

The stability of the Malaysian economy is overshadowed by global geopolitical risks: heightened trade tensions between the U.S. and China, ongoing conflicts in Ukraine, Israel, and the Gaza Strip. These factors negatively impact logistics and overall global trade activities.

The prevailing tight monetary policy adopted by most advanced economies poses downside risks for Malaysia, particularly the Malaysian ringgit, which is not feeling well, losing more than 2.4% against the U.S. dollar since the beginning of 2024.

'In such a situation, we cannot completely rule out a potential increase in the overnight benchmark interest rate,' said Kar Yong Ang, the Octa broker's financial market analyst.

In summary, all macroeconomic indicators point to a robust Malaysian economy. Only external factors, such as the weakening demand from the U.S. and tight monetary policy adopted by most countries, introduce uncertainty, which may further affect BNM's monetary tightening.

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