Malaysian economic growth will slow in 2023

According to analysts, Malaysia's economy would decline in 2023 as a result of difficult external circumstances and weakening internal demand.

According to a report by Maybank Investment Bank Research, Malaysia's full-year growth is expected to reduce to 4% in 2023 from its projected 8% growth in 2022, mainly due to a slowdown in domestic demand, according to Xinhua news agency.

In addition to the consequences of high inflation and high interest rates on cost of living and real disposable income, the research house anticipates slower growth in private consumption over the coming year as pent-up spending from the complete economic re-opening evaporates.

Along with the decreased budgetary allotment for government running expenses in 2023, it also anticipates moderate growth in public consumption.

In addition, it claimed that the prospect of slower global economic expansion leads to a decline in exports and imports of products and services.

In the meantime, MIDF Research expects Malaysia's gross domestic product (GDP) growth to reduce to 4.2% in 2023, mostly as a result of a slowdown in external trade performance due to a slower global demand.

"We predict that the global economy will slow down rather than go into recession in 2019. Demand conditions in the US and the EU will deteriorate in 2019, according to MIDF Research's forecast, as a result of higher interest rates and increased inflationary pressure.

The research firm predicts that Malaysia's actual export growth will decelerate to 2.8% from the growth projection of 12.5% for 2022, largely supported by improving services exports given the anticipation of a more active tourism industry.

On the other hand, it thinks that Malaysia will continue to gain from commodity exports, particularly those of palm oil, petroleum, and liquefied natural gas (LNG), as the average prices of crude palm oil (CPO) and Brent crude oil are expected to remain high for the coming year at 3,500 ringgit ($794) per tonne and $96 per barrel, respectively.

According to MIDF Research, the Malaysian domestic economy will be supported by consistently buoyant consumer spending, continued growth in tourism-related industries, and the resuscitation of infrastructure projects.

On the other side, Affin Hwang Investment Bank recently reduced its 2023 GDP predictions from 4.7% to 3.7% because it believes Malaysia's open economy will be badly impacted by the slowdown in global growth.

Despite the fact that Malaysia would be impacted by the slowdown in global economy, the research firm believes that a recession is improbable given Malaysia's stable labor market and the steady recovery of its tourism-related industries.

However, it expressed worry that Malaysia could have to contend with an increase in living expenses should the government make a solid commitment to bolstering its fiscal situation and allaying the concerns of the sovereign rating agencies.