KUALA LUMPUR (Sept 20): United Overseas Bank (UOB) expects Malaysia’s 2024 gross domestic product (GDP) growth target to be revised upwards to 4.5% to 5.5% during the Budget 2025 announcement on Oct 18, citing stronger economic conditions.

According to the bank in its global economics and markets research report on Friday, the current target of 4% to 5% could be revised to 4.5% to 5.5%, reflecting stronger growth that the Malaysian economy had had in the first half of the year.

“The upbeat GDP readings in 2Q24 brought GDP growth to 5.1% in 1H24 which was above our estimates. Recognising this and the horizon of positive growth catalysts that remain for the rest of the year, we raised our full-year GDP outlook to 5.4% [vs 4.6% previously] for 2024.

“We think it is possible for the official GDP growth target of 4% to 5% for 2024 to be revised higher to 4.5% to 5.5% during Budget 2025 announcement on Oct 18,” said UOB in its Quarterly Global Outlook 4Q 2024 report.

The revision is driven by several key growth catalysts, including the upturn in the global tech cycle, increasing tourism activities, and continued government cash aid to targeted groups, the Singaporean bank said.

Coupled with that, the implementation of various budget measures and catalytic initiatives outlined under national master plans are expected to sustain growth momentum, it said in the report.

UOB noted that the seasonally adjusted growth rate rose to 2.9% quarter-on-quarter in the second quarter (2Q2024), shows that the Malaysian economy is steadily recovering. The rate marks the second straight quarter of improvement, and the highest in two years.

“The seasonally adjusted growth accelerated to a two-year high of 2.9% q/q (1Q24: +1.5%), sustaining its improvement for the second consecutive quarter and affirming the recovery momentum,” said UOB.

Furthermore, the bank also highlighted that the Ministry of Finance’s (MOF) GEAR-uP programme, which aims to enhance domestic growth, plays a crucial role. 

The programme involves six government-linked investment companies (GLICs) pledging to invest RM120 billion in domestic direct investments over the next five years. 

Alongside public market investments of RM440 billion, these measures are likely to boost Malaysia’s economic outlook.

Meanwhile, the launch of Public-Private Partnership Masterplan 2030 (PIKAS 2030) on Sept 9 is expected to increase private investment to RM78 billion by 2030.

Additionally, the labour market remained strong, with unemployment steady at 3.3% and a record labour force participation rate above 70%. 

Private consumption is further supported by expected the Employees Provident Fund (EPF) withdrawals of RM15 billion this year and RM5 billion to RM6 billion annually from 2025 under the EPF restructuring.

“Civil servants effective December 2024 and review of private sector minimum wages are further tailwinds for consumption next year,” UOB added.