KUALA LUMPUR (Feb 27): RAM Ratings said there is an upside lift for the Malaysian economy in 2024 and maintained its gross domestic product (GDP) forecast at 4.5%-5.5%.

In a statement on Tuesday, the agency said Malaysia’s GDP growth underperformed in 2023 (3.7% versus consensus: 4.0%), mainly due to weaker export demand and cooler consumption momentum.

It said despite a relatively healthy start in 1Q2023, persistent softening in global trade through the year led to a sharp contraction in overall exports, significantly dragging overall GDP growth.

RAM Ratings said that domestically, elevated price pressures and lapse of large policy support weighed on private consumption, resulting in a lower print of 4.7%.

All said, it added that a strong pipeline of infrastructure and public projects, as well as private sector capacity expansion helped to pad economic growth in 2023.

“Notwithstanding the underwhelming fourth quarter performance, we believe there is an upside lift for the economy in 2024 and have maintained our GDP forecast at 4.5%-5.5%.

“The chance of a ‘soft landing’ appears to be higher for the global economy, with the International Monetary Fund (IMF) upping its 2024 global growth forecast by 0.2 percentage points to 3.1% last month,” it said.

RAM Ratings said Malaysia’s export growth also contracted at a slower pace of 6.9% in 4Q2023 (2Q2023: -11.1%; 3Q2023: -15.2%) with the January 2024 print showing a rebound in growth to 8.7%.

“Coupled with the predicted upcycle in trade and semiconductors, we may be seeing early signs of a turnaround in global trade.

“The IMF forecasts global trade growth to recover from 0.4% last year to 3.3% this year.

“Furthermore, the latest inflation print in January 2024 continues to point towards easing of price pressures, which along with a robust job market and supportive financial conditions could propel domestic demand higher this year,” it said.

RAM Ratings said that up ahead, key risks on the horizon remain, with the timing of interest rate cuts in the US exerting potential market volatility and for the domestic market, imported price pressures due to weak ringgit valuation.

It said escalating geopolitical conflicts could threaten the global commodity market and supply chain again.

“Domestically, we remain watchful over the execution of RON95 subsidy retargeting in 2H2024,” it said.