RAM Ratings: Malaysia to face challenging year ahead with strong fundamentals

Published on 23 Nov 2022.

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RAM Rating Services Bhd (RAM Ratings) briefed its investors and clients today on the prospects for the global and Malaysian economy in 2023.

Speaking at the webinar “Economic Outlook 2023: Choppy Waters Ahead?”, RAM Rating’s Head of Economic Research Woon Khai Jhek said Malaysia’s stellar growth in 2022 should provide a sturdy base for growth in a challenging 2023, albeit a slower one. Malaysia’s GDP YTD-3Q 2022 expanded by 9.3% year-on-year; RAM estimates full year growth to reach 8.2%.

Due to the looming threat of a global recession, Malaysia’s economy will inevitably face downside risks next year. “Malaysia cannot escape the ripple effects from slower global growth next year, which will directly soften external demand and dampen Malaysia’s export performance,” Woon said. Malaysia’s broad and diversified domestic economy, however, should help to prop up and mitigate the impact of weaker exports. 

RAM projects Malaysia’s GDP growth to come in slower at 4.0%-5.0% in 2023. Domestic demand will remain the key driver for growth next year, supported by the continued recovery in the labour market and existing policy support measures. That said, notable price pressures and tightening of monetary policy will likely dampen consumer spending. Headline inflation is anticipated to stay elevated at 2.7% in 2023 (2022e: 3.3%), although this is still subject to policy changes in domestic subsidies and global commodity prices next year. RAM is expecting at least another 25 bps hike in the OPR in 2023 to bring the policy rate back to the pre-pandemic level of 3.00%.

Further escalation of geopolitical tensions, supply chain disruptions, labour shortages and political uncertainty on the domestic front could add pressure to 2023’s growth  for the country. A faster than expected return of international travel and tourism are potential upsides to Malaysia’s growth.

Economist Intelligence Corporate Network’s Director for Southeast Asia Sumana Rajarethnam, RAM’s guest speaker at the webinar, expects that the global economy will continue to face major headwinds in 2023, most notably from the fallout from Russia's invasion of Ukraine, global monetary tightening and an economic slowdown in China. “The war is affecting the global economy via higher commodity prices, supply-chain disruptions and Russia's weaponisation of energy supplies. This situation will persist throughout 2023, as the Economist Intelligence Unit (EIU) expects the war to become a protracted frontier conflict," Rajarethnam said. 

Both speakers concluded that even as economic uncertainties and headwinds are expected to intensify next year, there are some bright spots and opportunities to look forward to. These include the easing of China’s zero-COVID policy, moderation in global food commodity prices and broader return of international travel. RAM remains cautiously optimistic of the year ahead, with the Malaysian economy expected to continue on the path of recovery and recover lost ground incurred over the last two years.


Analytical contact
Woon Khai Jhek, CFA
(603) 3385 2512

Media contact
Tho Li Ming
(603) 3385 2511


About RAM Rating Services Berhad (RAM Ratings)

Established in 1990, RAM Ratings is a leading credit rating agency registered under the Securities Commission’s Guidelines on Registration of Credit Rating Agencies, 2011. In addition to the provision of credit ratings for corporate bonds and sukuk and their issuers, RAM Ratings also provides research and publications on Islamic finance, fixed income and macro-economic and industry analysis as well as data analytics relating to credit risk, counterparty assessments and other related domains. 


ALL INFORMATION IS PROVIDED “AS IS” WITHOUT WARRANTY OF ANY KIND. Although every reasonable care has been taken to ensure the accuracy, completeness and objectivity of the information contained in this Media Release, RAM Ratings makes no representation or warranty, whether express or implied, as to its accuracy, completeness and objectivity and accept no responsibility or liability relating to any losses or damages howsoever suffered by any person arising from any reliance on the views expressed or information in this Media Release. RAM Ratings assumes no obligation to update any information or statement contained herein, save for any information required to be disclosed by law.

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