Roundup: Economists maintain Malaysia's full-year growth forecast despite good Q1 figure

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KUALA LUMPUR, May 15 (Xinhua) -- Economists on Monday maintained Malaysia's full-year growth forecast despite its first-quarter gross domestic product (GDP) growth surpassing market expectations.

Affin Hwang Investment Bank said in a note that with downside risks from external factors, particularly concern over weaker-than-expected export growth, it is maintaining its projection that Malaysia's real GDP growth will likely be slower at 3.7 percent in 2023.

Apart from the global economic slowdown, it believes the likely decline in global semiconductor sales in the months ahead will impact and lower growth in Malaysia's external demand in 2023, as the electrical and electronics(E&E) sector remains the largest sector, accounting for about 40 percent of total exports from Malaysia.

However, it said growth in domestic demand will remain strong, supported by private consumption from low unemployment as well as improvement in tourism-related activities.

Meanwhile, Kenanga Research said in a note that it keeps Malaysia's 2023 GDP forecast at 4.7 percent, underpinned by the persistent strength in both external and domestic demand in the first half.

However, it said its forecast is subject to potential downside risks stemming from a possible deceleration in the global economy in the second half.

While the economy is expected to continue expanding in the first half, it anticipated a slowdown in the second half due to weaker external demand and a rising risk of recession in the global economy, particularly in the United States and Europe, brought by tighter financial conditions.

It said further expansion is expected in the second quarter, as growth is projected to be underpinned by strong domestic demand, supported by steady labor market conditions, increasing tourism activity boosted by China's reopening and further realization of multi-year investment projects.

Growth will also be underpinned by the manufacturing sector, given the continued demand for E&E products and sustained demand from China, it said.

It also said the pro-growth policies implemented by the government are expected to continue improving investor sentiment and attracting capital inflows, thereby supporting overall GDP growth in 2023.

Public Investment Bank also said in a note that it held Malaysia's 2023 GDP growth projection of 3.8 percent despite ongoing external risks.

Notwithstanding the external uncertainties, its outlook posits that the nation's economy will persist in exhibiting steadfastness, buoyed by resilient domestic demand dynamics, in conjunction with further enhancements in labor market conditions.

It anticipated Malaysia's economy to increasingly rely on endogenous sources of growth, with private investment activity poised to serve as a stimulus through sustained capital expenditure, particularly within the manufacturing and services sectors.

Within the manufacturing sector, it posits that manufacturers are poised to maintain production levels within domestically-oriented industries, as Malaysia's domestic demand exhibits persistent signs of recovery, primarily driven by private consumption.

The anticipated positive spillover effects from the re-tabled budget 2023, including the provision of subsidies such as cash handouts and special assistance payments, are also expected to bolster this recovery.

OCBC Bank also said in a note that it maintained Malaysia's 2023 GDP growth forecast of 4.4 percent as the external sector slowdown portends weaker growth for the rest of 2023.

According to the bank, the weakness in the first quarter goods exports portends further weakness for the Malaysian economy for the rest of 2023 as the economic recovery in main trading partners remains constrained by still tight monetary policy and elevated domestic interest rates.

"We expect some knock-on impact from weaker external demand onto domestic demand, particularly investment spending, while consumption expenditures moderate," it said.

Considering external headwinds and tightening monetary policy in many economies, MIDF Research also kept its GDP growth forecast this year at 4.2 percent for Malaysia.

The softer growth is mainly due to deceleration in external trade performance, taking into account anticipated slowdown in global demand.

According to the research house, Malaysia's real exports growth would reach 3 percent, partially supported by improving services exports via tourism activity.

As China has reopened sooner than predicted, it is sanguine this will provide an extra boost to Malaysia's services exports as well as tourism activity.

However, it believes Malaysia's external trade will continue benefiting from commodity exports, especially palm oil, crude petroleum and liquefied natural gas (LNG), as the prices of crude palm oil and Brent crude oil are expected to stay elevated for 2023.

Agriculture and mining sectors are projected to expand at 1 percent each while manufacturing output to grow modestly by 2.7 percent for 2023.

As for domestic sectors, it said the construction sector will post stronger growth on the back of high development expenditure levels set by the government while the services sector will gain from softening inflationary pressure and improving labor market conditions.

The Central Bank of Malaysia announced last Friday that the Malaysian economy expanded 5.6 percent year on year in the first quarter, driven mainly by domestic demand.

Despite global headwinds, the central bank projected the Malaysian economy to expand by 4 percent to 5 percent in 2023, driven by firm domestic demand. Enditem

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