Economic growth momentum to stay weak through 2H 2023 but upside seen for 2024

Published on 11 Sep 2023.

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In its Economic Update 2023 report released today, RAM Ratings expects Malaysia’s economic momentum in 2H 2023 to remain challenged by soft global demand and other headwinds. We project GDP growth in 2023 to slow to 4.0%-5.0% from 8.7% in 2022.

Overall GDP growth decelerated to 4.2% y-o-y in 1H 2023 (2H 2022: 10.4%) as global trade slowed and the semiconductor downcycle bit into exports. Exports declined 6.4% y-o-y in volume terms in 1H. Base effects knocked the figures down further. Domestic demand, the key driver of economic growth, was also softer at 4.5% in 1H 2023 compared to 9.9% in the second half of last year, as spending behaviour normalised.

The weakening momentum seen in 2Q 2023 is likely to persist through the rest of the year as external headwinds loom large. A spike in global food and commodity prices due to supply distortion by geopolitics and/or tariffs is a key downside risk that could inflate domestic prices and put a brake on local consumption demand. Lacklustre global demand, aggravated in particular by China’s property crisis, could crimp Malaysia’s export growth.

Nevertheless, there are bright spots on the horizon that could see the country eke out growth of 4.5% to 5.5% in 2024. The labour market continues to stay robust, powering domestic demand. Recent data also indicates tentative signs of the current electrical and electronic (E&E) downturn bottoming out, potentially lifting exports next year. The resolution of labour shortage issues could provide additional impetus to growth of laggard sectors like agriculture and construction. Bets are now increasingly on a soft landing for the US economy, leading to possibly a less severe global slowdown.


Summary of RAM’s key projections

Sources: Department of Statistics Malaysia, Bank Negara Malaysia, Bond Pricing Agency Malaysia, Ministry of Finance Malaysia, RAM
Note: 2023f figures are RAM projections


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Woon Khai Jhek, CFA
(603) 3385 2512

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(603) 3385 2500


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 Credit Rating Agencies. 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. 


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Publication Date Published Category
Economic Update 2023 11-Sep-2023 Economic Outlooks View PDF