KUALA LUMPUR (March 20): Bank Negara Malaysia (BNM) is projecting Malaysia's gross domestic product (GDP) to expand between 4% and 5% in 2024, as compared with 3.7% in 2023, driven mainly by resilient domestic expenditure, with additional support emanating from the expected recovery in exports.

The central bank’s projection is in line with Putrajaya's 4%-5% forecast for 2024, which Prime Minister Datuk Seri Anwar Ibrahim, who is also the finance minister, maintained in a statement on Feb 16 after the government missed its target for 2023.

BNM said its projection is supported by the improvement of external demand fuelled by the rebound in global trade and the tech upcycle, which is positive for Malaysia given its significant role in the semiconductor supply chain.

“This will provide positive spillovers to our exports and production,” the central bank said in the Economic and Monetary Review 2023 report released on Wednesday.

It said Malaysia’s tourism sector is also expected to benefit from the recovery of global tourism to pre-pandemic levels.

BNM said the resilient domestic demand remains a driving force for Malaysia’s economic growth, with continued employment and wage growth supportive of household spending.

“Household spending [forecast at 5.7% in 2024 versus 4.7% in 2023] will be underpinned by improving labour market conditions given the ongoing recovery in tourism-related sectors, as well as higher production and trade activities,” the bank said.

“Government measures, including the expansion of Sumbangan Tunai Rahmah (STR) and the early incentive payment for civil servants, are also expected to support household spending.”

BNM added, however, that domestic growth remains subject to downside risks from both external and domestic factors. External factors include a weaker-than-expected global growth and further escalation of geopolitical conflict.

"Domestically, more severe shocks on commodity production and the implementation of subsidy rationalisation could also weigh on the growth outlook," it said.

Meanwhile, BNM said Malaysia’s investment growth will be supported by the continued progress of multi-year projects across the public and private sectors, as well as the catalytic initiatives under strategic master plans such as the New Industrial Master Plan 2030 and the National Energy Transition Roadmap.

“The realisation of investments promoted under these master plans will span across several years, thus providing continued positive spillovers to the economy going forward,” the central bank noted.

Don't miss the other highlights of the BNM Annual Report 2023. Read the articles here.