KUALA LUMPUR (Oct 2): The World Bank reduced its forecast for Malaysian economic growth, as measured by gross domestic product (GDP), to 3.9% this year from 4.3% projected previously, amid substantial deceleration in external demand.
However, the bank raised its 2024 projection for Malaysian GDP to grow 4.3%, up from 4.2% previously, according to its East Asia and Pacific October 2023 Economic Update published on Monday.
World Bank lead economist for Malaysia Dr Apurva Sanghi said the country's economy is expected to be driven by recovery in global growth, the tourism sector and anticipated higher oil prices.
“The economy is expected to face significant external risks. Deeper global growth shocks could potentially result in a more significant slowdown than anticipated,” he told reporters at a briefing here.
Sanghi said the base effect also plays a role in the World Bank’s GDP growth forecasts, given that the country’s economy rebounded 8.7% last year, so expansion is projected to moderate in 2023, before accelerating in 2024.
“On the domestic front, key sources of downside risk are linked to uncertainties surrounding domestic inflation. Higher domestic inflation could weigh on the strength of consumption spending. An upside shock to inflation may also prompt further monetary tightening,” he said.
As the economy continues to grow, Sanghi said it is expected that poverty and income inequality will further decrease, provided that it is accompanied by policies that enhance inclusiveness.
“Meanwhile, around 490,000 Malaysian households remain vulnerable and are grappling with the aftermath of Covid-19. This underscores the importance of having effective and well-targeted social protection programmes.
“The government's initiative to establish PADU (Pangkalan Data Utiliti Kebangsaan), the national household socio-economic database, as a basis for identifying eligible beneficiaries plays a critical role in ensuring broader coverage and enhanced protection,” he said.