Thursday, December 19

Maybank IB: 2024 to be a ‘take-off’ year for Malaysia’s economic transition, GDP firmer at 4.4%

The year 2024 should be a ‘take off’ year for Malaysia’s medium to long-term economic transition outlined in last year’s blueprints, masterplans, roadmaps and legislations, with the economy growth expected to be firmer at 4.4% this year, Maybank Investment Bank said.

It said these include the Madani Economy, National Energy Transition Roadmap (NETR), New Industrial Master Plan (NIMP2030), 12th Malaysia Plan Mid-Term Review (12MP MTR), Hydrogen Economy and Technology Roadmap (HETR), Fiscal Responsibility Act (FRA) as well as Energy Efficiency and Conservation Act (EECA).

On the country’s economic growth, the research firm said the growth would be underpinned by resilient consumer spending, sustained private and infrastructure investment momentum, plus recoveries in trade-related services and manufacturing industries, namely tourism and electronics.

“Fiscal reforms and economic restructuring will be high on the agenda. The key element of fiscal reform in 2024 is targeted fuel subsidy rationalisation while the main item under economic restructuring is the Progressive Wage Policy (PWP) to address the cost of living, adequacy of retirement savings and equality issues,” it said in a note today.

It also said the recent Cabinet reshuffle, next general election in four years’ time, sub-two per cent monthly inflation rate currently, and fiscal consolidation targets legislated by FRA were the ‘carrots and sticks’ to execute and implement.

“The exact details on timing and mechanics of targeted fuel subsidy rationalisation are still pending, but we need to see strict enforcement to address serious diesel subsidy leakage, the rollout of Central Database Hub to ‘means-testing’ eligibility for targeted RON95 subsidy and gradual adjustments in fuel prices to mitigate the impact on inflation,” it said.

It expects a slight inflation uptick in 2024 amid gradual adjustments in subsidy rationalisation measures to mitigate the impact on inflation, with inflation to re-accelerate to 3.0% in 2024 compared to 2.6% last year.

“Consequently, we expect Bank Negara Malaysia (BNM) to keep the overnight policy rate (OPR) at 3.00% in 2024 despite the outlook of interest rate cuts in major advanced economies and regional peers, which is expected to be positive for ringgit versus the US dollar,” it said.

Maybank Investment Bank has projected the local note to appreciate towards the 4.40 level by the end of 2024.

“For equities, the tail-end of global monetary policy tightening is a tailwind, while stable domestic interest rate policy outlook, economic transformation via the NETR and NIMP2023, and rising foreign direct investment (FDI) momentum are the key catalysts,” it said.

It also looks forward to better corporate earnings growth in 2024, while maintaining the 2024 FBM KLCI target of 1,610.

“For investment strategy, we recommend a portfolio of selective trade-related and domestic sectors, balanced with yield and enviromental, social and governance (ESG) stocks,” it said.

Globally, it expect the global real gross domestic product (GDP) growth to slow at 2.8% this year as US economy ‘soft lands’ on factors like household excess savings and resilient job market supporting consumer spending, supply-side or industrial policies lifting the US manufacturing investment and expansionary fiscal policy negating the Federal Reserve’s interest rate hikes.

Meanwhile, the key risks include a ‘higher-for-longer’ US interest rates, widening of the US-China geopolitical rivalry, escalations in Russian-Ukraine war and Middle East instability due to Israel-Hamas war as well as China’s real estate sector flaring up and souring financial or capital market sentiment, it added. — Bernama

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