Malaysia’s Economic Growth Forecast for 2024

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By Ying Xian Wong

The finance ministry of Malaysia has projected the country’s economic growth for 2024 to be in the range of 4.0% to 5.0%, on par with its estimates for the current year. This growth is expected to be driven by a broad-based expansion and improved global trade prospects.

Broad-Based Growth Led by Services Sector

According to Malaysia’s annual fiscal outlook report released on Friday, the growth is anticipated to be broad-based, with the services sector leading the way. Economic activity in intermediate and final services groups is expected to increase, supported by a likely recovery in domestic consumption and improved exports, particularly in electronics and edible oil demand.

Moderation in Economic Growth for 2023

The finance ministry has forecasted a moderation in economic growth for 2023, with an estimated growth rate of approximately 4.0%. This comes after a significant expansion of 8.7% in the previous year, as the country faces rising external headwinds.

Strong Performance in First Half of 2024

Malaysia’s economic growth in the first half of the year reached 4.2%, primarily driven by private expenditure. Despite challenges such as low external demand and a high base comparison, the ministry expects the economy to expand moderately in the second half of this year, with domestic demand continuing to be a growth driver.

Inflation Outlook

The ministry expects consumer inflation to range between 2.5% and 3.0% for the year, lower than the previous estimate of 2.8% to 3.8%. This is due to moderating global commodity prices, easing supply-chain disruptions, and government subsidies on selected items. In 2024, consumer prices are estimated to rise between 2.1% and 3.6%, partly driven by the government’s transition towards a targeted subsidy mechanism.

Budget for Fiscal 2024

The finance ministry has announced a budget of 393.8 billion ringgit ($83.57 billion) for fiscal 2024. The government aims to reduce the fiscal deficit to 4.3% of the gross domestic product (GDP) next year, supported by higher revenue, lower expenditure, and continued fiscal consolidation. Malaysia’s targeted fiscal deficit for 2023 stood at 5.0% of GDP.

Higher Revenue and Lower Expenditure

The ministry expects government revenue to increase to MYR307.6 billion in 2024 compared to MYR303.2 billion in 2023. This growth is anticipated to be driven by higher taxes, including a capital gains tax on the disposal of unlisted shares. Additionally, the government’s operating expenditure for 2024 is expected to rise to MYR303.8 billion.

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