Published on 20 Dec 2023.
In its Economic Outlook 2024 report released today, RAM Ratings expects Malaysia’s economic momentum to steadily improve heading into next year, benefiting from a potential turnaround in external demand. Leading indicators point to signs that global trade and semiconductor demand have reached their nadir in 2023. Resilient domestic demand, supported by benign inflation and interest rates would also propel growth momentum. We have pencilled growth to reach 4.5%-5.5% in 2024 from an estimated 4.0% this year.
Risks on the horizon for Malaysia’s growth will hinge largely on the global economy successfully achieving a ‘soft landing’ and avoiding further escalation of geopolitical conflicts. A spike in global food and commodity prices could pressure domestic demand, as will unintended price ripple effects of a poorly-executed retargeting of RON95 subsidies in 2H 2024.
On the fiscal side, RAM estimates fiscal deficit to clock in at 4.2% of GDP in 2024 (2023e: 5.0%), reflecting the fiscal consolidation path of the government. The narrower deficit will mainly be driven by a lower subsidy bill, better managing of other operating expenditures and higher tax revenue collections from an upside in economic conditions next year. With a need to fund critical development projects, government debt will remain relatively sticky at RM1.3 tril in 2024 (62.7% of GDP) and debt servicing not insignificant at 16.1% of total projected revenue in 2024 (2023e: 15.2%). Balancing between future economic growth and fiscal consolidation remains the standing order of the day.
Summary of RAM’s key projections
Sources: Department of Statistics Malaysia, Bank Negara Malaysia, Bond Pricing Agency Malaysia, Ministry of Finance Malaysia, RAM
Note: 2023e & 2024f figures are RAM projections
Woon Khai Jhek, CFA
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