KUALA LUMPUR (Dec 15): The Malaysian economy is projected to pick up slightly to 4.3% in 2024, supported by resilient private consumption and investment and a rebound in public spending, according to the International Monetary Fund (IMF).

In its End-of-Mission to Malaysia statement on Dec 14, IMF team leader Lamin Leigh said Malaysia has weathered external headwinds well and is projected to grow at 4% in 2023.

He said private consumption remained the main driver of growth throughout the year, supported by a healthy labour market.

He said exports to major trading partners weakened markedly due to subdued external demand and the economic slowdown in China.

Headline and core inflation have been moderating — more gradually for core inflation — with headline inflation projected at 2.9% in 2023. Inflation expectations remained well anchored.

Leigh said inflation is projected to moderate further to 2.7% in 2024, though uncertainties around the inflation outlook remain, including on account of subsidy reform.

“A fiscal consolidation path, as appropriately set out in Budget 2024, would rebuild buffers, put debt on a downward path, and reduce fiscal risks.

“It should however be credibly underpinned by high quality and durable revenue measures. Those measures, chief amongst which could be implementing a carefully designed consumption tax, would create space for critical investment needs and for targeted transfers to low-income households.

“They will also help buttress market confidence in Malaysia’s strong fundamentals,” he said.

Leigh said monetary policy should pursue a tightening bias in the near term in a data-dependent manner to keep inflation contained and expectations anchored.

He said the tightening bias is warranted by still higher than desirable core inflation and ongoing, yet uncertain, subsidy reform.

“Enhanced monitoring of household and corporate balance sheets is needed in the current environment of high interest rates, weaker exchange rate, and lower growth.

“Exchange rate flexibility should continue to be the first line of defence against external shocks,” he said.

Leigh also said implementation of the policy initiatives under the Madani Economy framework, the mid-term review of the 12th Malaysia Plan, and the accompanying national strategic plans, should accelerate to support medium-term growth and achieve high-income status.